Analysis of Pomegranate Value Chain in Kandahar Province of Afghanistan: Issues and Prospects

Pomegranates are one of the most important fruits in the Kandahar province of Afghanistan, which is famous for its pomegranates around the world. Pomegranates play a vital role in the socio-economic life of those who grow them. This study empirically analyzed the value chain of pomegranate production in Kandahar using primary and secondary data. Primary data was collected from 200 pomegranate growers in the Dand, Panjwai, and Daman districts of Kandahar province. These growers were selected using a random sampling method and the data was collected using a structured, pre-tested questionnaire. The secondary data was collected from traders, local collectors, and exporters of pomegranates involving 30 pomegranate selling companies. The value chain analysis shows that from the main four chains of pomegranate production (farmer, collector, trader, and exporter), the main actors are the exporters who process pomegranate and add the greatest value by investing in marketing, shipment, and warehousing and receive highest profit margin among the stakeholders. Exporters of pomegranates to Europe earn an average of 66 Afghani per kg. The next greatest beneficiaries are the growers or farmers who earn an average of 23 AFN on each kg. Local collectors who buy pomegranates from farmers earn the least, at an average of 13 AFN per kg over the costs of processing and transportation.

Do Underlying Risk Preferences explain Individuals’ Cognitive Ability?⁕ Evidence from a Sample of Pakistani Students

Emerging research in empirical economics posits a question on the relation between underlying risk preferences and reflective cognitive ability. In an experimental setting, a preliminary sample of 260 participants undergo a series of incentivized choice experiments to elicit risk preferences and a Cognitive Reflection Test (CRT) to obtain estimates of their reflective ability. We sidestep potential biases by using a Fechner error specification along with a contextualized version of the utility function. Individuals who are more likely to avoid risky outcomes have significantly lower scores on the CRT. The analysis validates a prominent relationship spanning the economics and psychology literature and suggests a potential direction of causal inference for future research.

The Impact of Fiscal Policy on Income Inequality: A Case Study of Pakistan

This study investigates the impact of various fiscal policy instruments on the income inequality of Pakistan using an Auto Regressive Distributed Lag (ARDL) model on annual data. We find that direct taxes reduce income inequality, measured using the Gini index, while indirect taxes increase disparities. As the major portion of tax revenues are indirect taxes, the current tax regime of Pakistan does not achieve income redistribution. Similarly, development expenditures have significantly reduced income inequality, likely through the creation of employment opportunities. On the other hand, the overall fiscal deficit increases income inequality, due to a rising public debt financed by (regressive) indirect taxes. This study suggests that in the case of Pakistan, where direct taxes are low, a large shadow economy exists, and weak tax administration prevails, an increase in development expenditures and broadening of the tax base of direct taxes should be the main fiscal policy tools for income redistribution. Moreover, persistent high fiscal deficits in the long run should be avoided. Finally, governments should reduce educational inequalities and promote democratic values in the country in order to promote greater fairness in distribution of income.

Developing Housing Finance in Pakistan – Challenges and Opportunities

Expanding home-ownership poses a fundament financial challenge arising out of the long-term nature of the asset, which calls for the development of institutions and markets to facilitate the flow of long-term funds. Development of the secondary mortgage market would alleviate classical maturity mismatch and liquidity issues. The public sector can provide an enabling environment with sound macroeconomic policies, corporate governance, rule of law, and enforceability of contracts. This study draws policy implications using the empirical evidence on the determinants of mortgage depth and penetration across countries. A large part of the variation in these two dimensions across countries is explained by the level of their financial development. Development of long-term sources of funds intermediated through specialized institutions seems particularly important, as we find that the development of pension funds, which are a source of long-term funding, is strongly associated with mortgage market development. Monetary and macro-economic stability, as indicated by a low and stable rate of inflation, appears to be a strong predictor of mortgage market development. We also detect a positive relationship between the degree of competition in the financial sector and mortgage market development.

Estimation and Forecasting of Industrial Production Index

It is essential that policymakers consider cyclical changes in output. Monthly industrial production is one of the most important and commonly used macroeconomic indicators for this purpose. However, monthly estimates of industrial production are not available for Pakistan. Instead, policymakers rely on a large-scale manufacturing (LSM) index that accounts for only 10 percent of GDP. Another limitation of this index is that it accounts primarily for private sector industry, leaving out the direct public sector presence in industrial production. Economic policymakers rely heavily on the LSM index to gauge economic activity in Pakistan. In this study, we compute a new industrial production index (IPI) that extends to the whole industrial sector in Pakistan, incorporating additional information that the LSM index misses. Post-estimation, we build seven econometric models reflecting conditions in the real, financial, and external sectors to estimate year-on-year changes in the new IPI. Our results show that the root mean square error of the ARDL model reflecting financial conditions is lowest of the models tested, which included AR, VAR, and BVAR, across all horizons.

An Analysis of the Cost Structure of Food Industries in Pakistan: An Application of the Translog Cost Function

Given the importance of food industriesin Pakistan, this studyanalyzestheircost structure by estimating thetranscendental logarithmic cost function. The study also considers elasticity of substitution along with own-price elasticity and cross-price elasticity. Four factor inputs,i.e.,labor, capital, energy,and materials,are used toestimatethe cost function. The results indicate that materialsaccount for the highest share of the cost. The elasticity of substitution of materialsfor capital and energy is also weak. The own-price elasticities indicate that the demand for materialsis least responsive to a change in its own price while the demand for other inputs varies with price. The cross-priceelasticities show that labor, capital and energy are substitutes foreach other. The output elasticity of cost demonstrates the presence of economies of scale.

Unskilled Migration, Child labor and Human Capital Accumulation of Children in the Presence of Parental Absenteeism

Temporary unskilled migration and the remittancesit generateshavethe potential to reduce child labor and improve educational outcomes in developing countries. However, recent literature points towards the adverse impact of the parental absenteeism on children left behind. We build a theoretical model to explore the joint impact of remittances and parental absenteeism on child labor and human capital formation of children left behind in the context of unskilled workers’ migration. We find threshold conditions for the relative wage of source to destination countriesbeyond which unskilled migration helps in reducing child labor and increasing human capital. Moreover, the threshold is endogenous and depends on the sensitivity of human capital formation to parental absenteeism relative to the child’s time spent on acquiring human capital. In a special case when the former is equal to the latter, the wages in the destination country should at least be twice as much as in the source country to have a detrimental (promoting) impact on child labor (human capital formation). Since the importance of parental absenteeism would depend on a variety of sociocultural factors such as marriage, presence of extended families, religious communities, and social networks, there will be heterogeneity in the impact of unskilled migration.

Trade Agreements and Export Creation: An Empirical Analysis of Pakistan’s Exports at Industry Level

This paper examinespatternsof export creation and diversion by analyzing Pakistan’s trade agreements at the two-digit industry level for all 88 export-oriented industries. We compare the net change in exports with nine free trade agreement (FTA) partners and the top15 partners with most-favored nation (MFN)status. We find that 45 industries account for USD4.1 billion inexport creation across all Pakistan’s FTA partners.Here, net exports increase after FTAs with both FTA and MFN partners. Conversely, export diversion worth USD137million occurs in 10 industries with all FTA partners as net exports to FTA partners rise while net exports to MFN partners fall. In the same manner, we find that net exports in 33 industries declined by USD500 million with FTA and MFN partners. The totalnet exports addition after FTAs was USD3.5 billion or,on average,USD350 million annually,accounting for about 1.4 percent of Pakistan’s total annual goods exports. On average, Pakistan has successfullycreatedexports in half itsexport-oriented industries, althoughhighly subsidized industries exhibit either export diversion or a net decline with both MFN and FTA partners. A difference-in-differenceanalysis shows that exports to China and Mauritius rose significantly while the remainingseven FTA partners did not have a significant increase in exports after the FTAs were implemented. In view of these findings, wesuggest revisiting the policy of export subsidies.

Regional Economic Integration and Productivity Convergence: Empirical Evidence from East Asia

The study attempts to seek evidence on regional economic integrationin driving labor productivity convergence in low-and middle-income East Asian states towards Japan, the country assumed to be the regional technology leader. The labor productivity convergence of low-and middle-income East Asian countries towards their rich neighbor is modelled against their national levels of innovation, technology spill-oversfrom the regional economic leader and their productivity differential with the frontier country. The hypothesized relationship is empirically verified for seven East Asian states, using a robust econometric approach. The time-series test estimates under Error Correction Representation yield absolute support in favor of valid productivity convergence occurring between Japan and its low-and middle income neighbors. However, panel data estimates generated with better statistical power outperform the time-series test findingsand these results reject the significance of Japan as the regional productivity growth driver for its regionaldevelopingstates.

Pakistan’s Balance-of-Payments Crisis and Some Policy Options

Neoclassical price theory, and its extension to IMF country advice, argues that balance-of-payments crises such as Pakistan’s are better resolved by depreciating the exchange rate, making exports cheaper and imports dearer. We argue that a partial equilibrium analysis of just the tradeable goods market on the current account side ignores the capital market on the capital account side, where an increase in outflows allows no equilibrium value for the exchange rate, through a phenomenon dubbed ‘depreciationary expectations’, akin to inflationary expectations. Thisphenomenon will not allow the exchange rate to settle at an equilibrium level, leading to a vicious downward cycle. In such a case,capital controls may well be needed to counter the downward cycle, allowing a return to growth.