THE EFFECT OF TRADE LIBERALIZATION ON EXPENDITURE STRUCTURE OF PAKISTAN

Khalil Ahmad, Amjad Ali and Michael Yang
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Michael Yang: Assistant Professor; St. Lawrence University 23 Romoda Drive, Canton, NY 13617 Hepburn Hall 017

Bulletin of Business and Economics (BBE), 2022, vol. 11, issue 1, 73-84

Abstract: Demand side public policy paly a risk reducing role for imperfect sectors of the developing economies through public investment during liberalization. Public sector investment, composition and structure play an important role to determine the comparative advantage for productive sector. This study explores the effect of trade liberalization and trade tax revenue on expenditure structure of Pakistan during 1975-2019. Autoregressive Distributed Lag approach has been used for examining the long run co-integration among the expenditure structure and trade liberalization and Error-Correction model is used for short run dynamics of the concerned variables. The empirical result shows that trade tax revenue has positive impact on expenditure structure in long run but not in short run. Trade liberalization, budget deficit and defence expenditure have negative association with expenditure structure. Underground economy has also negative impact on expenditure structure but most surprising result of political stability shows negative relation with expenditure structure. As more political stability in Pakistan, the share of non-development expenditure is higher as compared to development expenditure during trade liberalization.

Keywords: Average Tariff rate; Trade Tax Revenue; Expenditure Structure (search for similar items in EconPapers)
JEL-codes: F10 F13 H71 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: The Effect of Trade Liberalization on Expenditure Structure of Pakistan (2022)
Working Paper: The Effect of Trade Liberalization on Expenditure Structure of Pakistan (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:rfh:bbejor:v:11:y:2022:i:1:p:73-84

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