Price-setting for Residential Water: Estimation of Water Demand in Lahore

The Water and Sewerage Agency (WASA) of Lahore is facing soaring demand and rising costs. But while massive investments are made to augment supply, tariffs remain low and are not adjusted in line with growing expenses. This has resulted not only in heavy and increasingly unsustainable reliance on loans and subsidies, but also in consumers undervaluing the resource, resulting in its inefficient utilisation. In this scenario, water tariffs badly need to be reformed. This study explores the potential of a pricing policy to regulate residential water demand in order to achieve the objectives of cost recovery, efficient water use, and equitable allocation of water resources. To this end, a demand function is estimated using household level data about water consumption and socio-economic characteristics of 156 households supplied by WASA, Lahore, for the period 2004-2006. Under block-rate tariffs the price variable is endogenously determined and a system of simultaneous equations emerges, solved here using two-stage least squares method. The estimated model explains 57 percent variation in water demand. The study finds water demand to be inelastic to price and, considering WASA’s exceedingly low tariffs, recommends up to 50 percent increase in the current tariff structure. Further computations show that a 50 percent increase will not endanger lifeline water supply. However, tariff increases may not be felt uniformly across all income groups, and absence of income data remains a limitation of this study. The study also recommends linking the non-volumetric part of tariffs to wealth-determined variables, such as property value and income.Water Demand; Price-setting

Terrorism or Political Terrorism Vs Tourism: New Evidence from Developing Countries

In the 21st century, tourism emerges as a significant income generating sector as well as weapon for growth and survival for various countries[1]. Tourism is the largest global industry with continuously growing global market which will triple in size by 2020[2]. Besides, numerous natural and human-caused disasters, the threat that accompanies political turmoil, tends to frighten potential tourists more severely. Such uncertainties in an economy can impede the flow of tourism. Terrorism risk tends to intimidate the traveling public more severely—as demonstrated by the realignment of travel flows and cancellation of vacations during periods of heightened terrorist activity. The tourism industry is highly vulnerable to such disturbances—whether social or political (i.e., riots, insurgency, terrorism, crime, political upheaval, war, regional tensions). This study also aims at finding a nexus between Terrorism and tourism based on new evidence from developing nations. Moreover developing nations have been further divided into two panels i.e. Politically Free , and Politically Not Free nations. This classification has been made to see whether political environment also affects terrorism activities in nations or not. Similarly another important aspect of this study is to see whether simply terrorist’s activities or Political terrorism[3] is a hurdle for the development of an economy. For this purpose different variables related to political terror and failures have also been used. Moreover time span for the study is from 1995-2011. Both parametric and non-parametric approaches have been employed. For evaluating the impact of Terrorist activities, data has been taken from World Governance Indicators(WGI), while data for tourism is from World Tourism Organization (UNWTO). Keywords: Tourism, Economic Development, panel Data [1] E. T. Heath, “Globalization of the Tourism Industry: Future Trends and Challenges for South Africa,” South African Journal of Economic and Management Sciences, vol. 4, pp. 542-569, 2001. [2] World Tourism Organization, World Tourism Barometer. [3] E. Neumayer, “The impact of political violence on tourism: Dynamic cross-national estimation,” Journal of Conflict Resolution vol. 48(2), pp. 259-281, 200

Welfaremindedness in Trade Policy Decision Making Process: A Qualitative and Quantitative Analysis from Developing Nations

The proposition of free trade has been one of the most important tenets of economists for the past two centuries. They have been of the view that free trade will be in benefit of nations in most of the cases. But “new trade theory” and “infant industry argument” does not support this principle of trade. Therefore now economists are trying to seek out not only economic rather political determinants of protection in nations. So this study has basically tried to see how government maximizes welfare of the society in designing trade policies specifically in developing countries. Moreover the whole developing region has been divided regime wise, domestic institutional wise and  income wise. Both quantitative and qaualitative analysis has been performed. Grossman Helpman model has been employed for estimating these welfare estimates. Time span of the study is from 1995-2010. And GTAP7 has been used for extracting data for intermediate inputs. Welfare mindedness has been calculated with lobby and without lobby formation in an economy. Results are very much close to the present world scenario that more rich and democratic nations are more welfare concerned than poor and autocratic nations. More over parliamentary democracies proved more welfare oriented than presidential democracies

Role of Institutions and Economic Growth in Asian Countries

For the past two decades, researchers have been focusing on the most important question related to economic growth, that is, what actually determines the growth of nations. In many empirical studies, geography, human capital, physical capital, trade integration, population and information technology have been found to be the major contributors to the development of economies[1]. But recently empirical research has started focusing on the role played by ‘institutions’. Therefore, development is no longer viewed as an outcome of capital accumulation but as a process of organizational change. However in growth literature this finding can be something new but economists acknowledge the supremacy of such organizations i.e. economies can be prosperous if they are free from government interventions.Thus role of institutions has been an important point of focus for economists for the past two decades. This study aims to examine the relationship among these institutions and economic growth in Asian countries. Study covers the time period from 1995-2010. Fixed effect model has been applied.  Results show that financial and legal institutions inter alia are more effective in increasing the economic growth as compared to other formal and informal institutions. We conclude from our findings that enforcement of sound financial and legal system can help to increase economic development. Key Words: Institutions, Financial Markets, Legal system, Economic Development, Formal Institutions, Informal Institutions, Legal institutions, Financial Institutions, Property Rights [1] Temple (1999) for references to the relevant empirical growth studies

AN ATTEMPT TO CRYSTALIZE THE BLACK-BOX MYSTERY: Institutional Quality or Constitutional Rights

This study deals with deeper analysis of the role of domestic institutional framework in policy making process of developing nations. Grossman-Helpman (1994) model of ‘protection for sale’ has been used to extract the extent of welfarism in government decisions related to trade policy, i.e., how much the government puts weight on welfare of the society when designing a trade policy. Findings of the study report that it is not about the type of political regime actually, rather it is about the types of political institutions under different constitutional structures, i.e., parliamentary or presidential systems which matters in promoting welfarism in government policies. These findings facilitates in drawing the conclusion that not only the democracy, rather parliamentary natured are welfare-enhancing for developing nations when taking any policy decision. Moreover, the results also support that de jure (constitutional rules) institutions play more imperative role in decision making as compared to the de facto (governance) institutions

Impact of CEOs Pay Disparity on Stability of Banks: Evidence from Pakistan

This study is carried out to investigate the nature of association between Banks’ stability and the Chief Executive Officers (CEOs) pay difference as compared to other executives for a sample of 17 Pakistani commercial banks, over the period of 9 years (2005 to 2013). The study finds that as compared to other executives, CEO pay difference has a significant but negative association with stability of banks performance, i.e., higher pay difference between CEO and other executives induced greater risk practices in banks. Hence, banks with lower stability must try to reduce the compensation gap between the CEO and his executive team, so that safe policies could be implemented