Wilfred Ethier. Modern International Economics. New York: W. W. Norton and Company. 1983. xviii + 588 pp.

Its been long recognized that various economies of the world are interlinked through international trade. The experience of the past several years, however, has demonstrated that this economic interdependence is far greater than was previously realized. In this context, the importance of international economic theory as an area distinct from general economics hardly needs any mentioning. What gives international economic theory this distinction is international markets for some goods and effects of national sovereignty on the character of economic activity. Wilfred Ethier's book, which incorporates recent developments in the field, is an excellent addition to textbooks on international economics for one- or twosemester undergraduate courses. The book mostly covers standard topics. A distinguishing feature of this book is its detailed analysis of the flexible exchange rates and a discussion of the various approaches used for their determination. Within each chapter, the author has extensively used facts, figures and major events to clarify the concepts in the light of the theoretical framework. The book also discusses, in a fair amount of detail, the existing international monetary system and the role of various international organizations

Determinants of Debt Problem in Pakistan and its Debt-servicing Capacity

In the last decade, Pakistan's external debt obligations have risen to an unprecedented level. This is despite the fact that the country had been able to borrow on concessional terms from international organizations and foreign governments unlike many other developing countries. The situation has raised concern about the viability of the strategy of excessive dependence on foreign sources and the problems it poses for sustainable growth. Between 1970 and 1980 Pakistan's external debt grew at an average rate of 11.3 percent. Althol1gh, during the Eighties it has grown at a much slower rate, i.e. 2.37 percent, but by 1986-87 the level of total external debt had reached more than 12 billion U.S. dollars. A notable feature of this change has been that since the mid-Seventies the debt service payments have increased at a much faster rate compared with the outstanding debt

Parental Characteristics, Supply of Schools, and Child School-enrolment in Pakistan

In recent years, due to a virtual unanimity about the critical role of human capital in economic development, increased efforts are being made in the developing countries to eradicate illiteracy. Despite a significant increase over time in the number of educational institutions and the government's expenditure on education in Pakistan, the performance of the education sector in terms of output has been at best meagre. This non-correspondence between the growth in the educational institutions and the resultant output implies that failure to enlist the participation of the population in education can hardly be attributed exclusively to an insufficiency of the schools. To the extent that child schooling reflects parental capacity to invest in human capital formation, there is a need to reckon with factors bearing parental decision regarding child schooling. This paper investigates family's decision regarding child schooling through an assessment of the determinants of child school-enrolment, using choice theoretic framework. The regression results are indicative of the influence of household status, both economic and social, on the propensity to invest in child schooling. A positive association between the household income, parental education, and tenurial status as land-owner bear out the importance of these factors in shaping the household's decision regarding investment in human capital formation. The study also finds traces of the quantity-quality trade-off in family's preferences regarding the number of children, and it is found to be male-specific. The most disturbing finding of the study appears to be the predominance of the influence originating from parental education. It is this inter-generational transfer of human capital which needs more attention as it also implies that illiteracy, and hence poverty, of the parents gets transmitted to the off-spring. The analysis also brings out the fact that the labour market hiring practices serve as an important feedback to the household's human capital formation behaviour.

Fuel Demand Elasticities in Pakistan: An Analysis of Households' Expenditure on Fuels using Micro Data

This study aims to examine the pattern of households' expenditure on fuel consumption in Pakistan using the data of Household Income and Expenditure Survey (1984-85). Price and income elasticities have been estimated by applying the Extended Linear Expenditure System. It is found that the expenditure pattern of the rural households is different from the urban households, with the rural households spending proportionately more on fuels. The estimates of the income elasticities imply that all fuels are a necessity for both urban and rural households. The price elasticities of different fuels are found to be extremely low, implying that the consumption of fuels in Pakistan is highly price inelastic.

Socio-economic Characteristics and Household Savings: An Analysis of the Households' Saving Behaviour in Pakistan

Domestic resource mobilization is one of the key determinants of sustained economic growth. Pakistan's performance with regard to domestic resource mobilization has been poor despite maintaining a respectable economic growth rate. Why is the savings rate so low in Pakistan? In this paper we analyse the household savings behaviour in Pakistan, using micro level data of the Household Income and Expenditure Survey (HIES) for the year 1984-85. Three different non-linear savings functions attributed to Keynes, Klein, and Landau are estimated separately for the urban and the rural households, using the Ordinary Least Squares (OLS) technique. It is found that the average income and saving of an urban household are considerably higher than those of overall Pakistan or a rural household. However, contrary to the general belief, it is found that the propensity to save of the rural households is much higher than that of their urban counterparts. The dependency ratio and the various categories of education are found to have a negative influence on household savings. No systematic relationship is found between savings and the employment status and occupation of the household head. It is found, however, that saving increases with age but tends to decline when the age crosses a certain limit - a finding consistent with the Life Cycle Hypothesis.

Household Consumption Patterns in Pakistan: An Urban-Rural Comparison Using Micro Data

This paper examines the household consumption patterns separately for the urban and the rural sectors in Pakistan by estimating the marginal expenditure shares and expenditure elasticities, for twelve broad commodity groups, using household level data for the year 1984-85. At the sectoral level, the marginal expenditure shares are estimated both with and without the 'community effect'. Furthermore, by dividing households within each sector into different income groups, income-specific marginal expenditure shares and elasticities are also obtained. This level of disaggregation reveals much richer consumption patterns as compared to the ones based on grouped data. The estimated marginal expenditure shares indicate that in examining the household consumption patterns one can safely assume that all the households in the sample face the same price structure. While the findings of the paper support the validity of Engel's Law, the estimates presented indicate that expenditure elasticities for different commodity groups vary with income and, in general, exhibit a cyclical pattern, which is explained in terms of quantitative as well as qualitative changes in the households' consumption basket. For a majority of the commodity groups, both structural and behavioural differences in the consumption patterns are found to exist between the urban and the rural households. Furthermore, our results also confirm the existence of economies of scale in the consumption of majority of the commodity groups. The degrees of these economies of scale are not only different across commodities but also between sectors and across the income groups within each sector.

Workers' Remittances from the Middle East and their Effect on Pakistan's Economy

In recent years, remittances, especially from the Middle East (ME), have become an important source of foreign exchange earnings for Pakistan. The absolute amount of these remittances, over the last several years, have been so large, that they were bound to have a significant impact on the Pakistani economy, through improving its balance of payments position and reducing its dependence on external financing. For example, in 1982-83 the inflow of remittances from the Middle East to Pakistan, through official channels, was 2.4 billion U.S. dollars which was 70 percent of total exports of goods and non-factor services. The recent decline in oil prices and the slowing down of economic activity in the Middle East, however, has resulted in the reduction of the inflow of remittances. The main concern, now, is what would the level of remittances be in future years and how will the economy readjust itself to the reduced inflow of the remittances