Munich Personal RePEc Archive

The Effect of Trade Liberalization on Expenditure Structure of Pakistan

Ahmad, Khalil and Ali, Amjad (2019): The Effect of Trade Liberalization on Expenditure Structure of Pakistan.

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Demand side public policy plays 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 the productive sector. This study explores the effect of trade liberalization and trade tax revenue on the expenditure structure of Pakistan during 1975-2016. Autoregressive Distributed Lag approach has been used for examining the long run co-integration among the expenditure structure and trade liberalization and Vector Error-Correction model is used for short run dynamics of the concerned variables. The empirical result shows that trade tax revenue has a positive impact on the expenditure structure in the long run but not in the short run. Trade liberalization, budget deficits and defense expenditure have negative associations with expenditure structure.

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