22 nd Annual General Meeting of the Pakistan Society of Development - - PowerPoint PPT Presentation

22nd Annual General Meeting of the Pakistan Society of Development Economists: Messages for the Role of Governance and Institutions in Economic Performance

Karim Khan Staff Economist Pakistan Institute of Development Economics, Islamabad

Pakistan Society of Development Economists (PSDE)

An Autonomous Body A Forum for Academics and Policy Makers Organizes Conferences and Seminars

22nd Annual General Meeting of PSDE

PC-Lahore-19th-22nd December Theme: Governance and Institution 14 Thematic Sessions and Panel Discussions+3

Technical Session+3 Plenary Session along with Inaugural and Business Sessions

Why Government and Institutions?

Commerce and manufactures can seldom flourish long in

any state which does not enjoy a regular administration of justice, in which the people do not feel themselves secure in the possession of their property, in which the faith of contracts is not supported by law, and in which the authority of the state is not supposed to be regularly employed in enforcing the payment of debts from all those who are able to pay. Commerce and manufactures, in short, can seldom flourish in any state in which there is not a certain degree of confidence in the justice of government. (Adam Smith: Wealth of Nations)

What is Government and Institutions?

Governance is defined as the traditions and

institutions that determine how authority is exercised in a particular country.

Institutions can be defined as “formal and

informal rules and their enforcement mechanism that shape the behaviour of individuals and

• rganizations in a society.

What is Good Governance and Quality Institutions?

Effective Rule of Law Adequate Protection of Property Rights Absence of Corruption Well-advised policy making Serving General

Interest

Create Incentives Structure

What is Good Governance and Quality Institutions?

A wise and frugal government, which shall restrain men from injuring one another, which shall leave them

• therwise free to regulate their own pursuits of industry

and improvements, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government. (Thomas Jefferson)

Debate on the Determinants of Growth

Solow’s Growth Theory—Labour, Capital and

Technological Development

Geography---Climate, Access to an Ocean Port,

Distance of Country from the World’s Major Trading Centers Affect Growth

Institutions and Policy Environment affect

Growth

PSDE 22nd AGM on The Role of Governance and Institutions

Lubna’s Paper → History of the Debate

– Geography Hypothesis (Climate, Geology,

Topography) directly affect economic performance.

– Institutions School →The effect of Geography of

economic performance is through its effect on institutions.

PSDE 22nd AGM on The Role of Governance and Institutions Cont.

Adeel Malik and Jonathan R. W. Temple’ paper

→ An empirical study on the role of institutions and geography.

– Uses Index of institutional quality or high quality

governance of Kaufmann (1999) and Tropical climate.

– Confirms the role of geography and institutions.

PSDE 22nd AGM on The Role of Governance and Institutions Cont.

Corruption and Income Inequality by Eatzaz Ahmad and Aman

Corruption→Growth and Income Distribution Corruption →Income Inequality →Adverse

Effect on Growth →Increase Poverty

Policies →Reduce Corruption →Improve Income

Distribution

PSDE 22nd AGM on The Role of Governance and Institutions Cont.

Good Governance and Income inequality by Saima Shafique and Rashida Haq Social Welfare ↑ with Economic Growth and Lower

inequality

Public Sector plays an important role but its efficiency is

lower.

Growth is positively related with income distribution Good governance would improve growth and Growth

improves income distribution.

Good Governance---Efficiency of Public Institutions and

minimizing corruption

PSDE 22nd AGM on The Role of Governance and Institutions Cont.

Governance and Pro-poor Growth by Rashida Haq and Uzma Zia

Pakistan has lowest score in the governance

indictors

Poor Does not Benefit Proportionately from

the economic growth

Good Governance → the reduction of Poverty

and Income Inequality

PSDE 22nd AGM on The Role of Governance and Institutions Cont.

Which Institution are relevant than others in inequality mitigation by Dawood

Good quality institutions reduce inequality Political Stability is more important than

democracy in the mitigation of inequality. (Dawood)

Social and Legal institution work together with

economic institution in the mitigation of inequality.

PSDE 22nd AGM on The Role of Governance and Institutions Cont.

Institutions, Economic Growth and the Role of Social Capital by Amir Mehmmod and Ming Yu

Institutions → Social Capital → Reduction in

Transaction Cost and Increased Efficiency → Economic Growth

Institutions → Social Capital → discrimination

against outsiders may prohibit flexibility and creativity → Economic Growth

PSDE 22nd AGM on The Role of Governance and Institutions Cont.

Public Policy Training and Civil Service Reforms by Anjum Khurshid

International experience of civil service reforms

should be a guide to local service reforms.

Adherence to the principles of merit and increase

investment on civil service training as key contributors to policy process and good governance.

PSDE 22nd AGM on The Role of Governance and Institutions Cont.

Devolution or Decentralization in Pakistan

(Thematic Session → Mohd. Naeem Ul Haq and Riaz Khan)

Benefits

– enhanced public service delivery, higher growth, lower

poverty, better macroeconomic management and better governance, participatory development, transparency.

Conclusion

Good governance and quality institutions are viewed as establishing an incentive structure that reduces uncertainty and promotes efficiency— hence contributing to stronger economic

• performance. Therefore, developing sound

institutional framework would be very much beneficial for the economy of Pakistan.

THANK YOU

for your Patience