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BDS Current Issue Volume XXXV June 2012 Number 2

Nexus of Trade, Investment and Poverty: Evidence from Pakistan

Author: AMBER FATIMA* MUHAMMAD SHAHBAZ** FARIDUL ISLAM ***

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Poverty alleviation, a complex multidimensional phenomenon, is among the most formidable challenges for policymakers in developing nation. Despite mixed results on the long term impact on poverty, the general view is that if implemented and managed carefully, trade and investment can help promote economic growth and alleviate poverty. The paper empirically examines the impact of trade and investment on poverty alleviation in Pakistan by employing the Johansen-Juselius (1990) approach to cointegration for a long run relation; and the error correction mechanism for the short run dynamics. The results suggest that poverty alleviation policy has brought fruition in Pakistan and helped achieve the objective both in the short and the long run. The findings should help policymakers determine appropriate strategy in addressing the economic growth vis-à-vis poverty. While investment is a key to promoting economic growth, trade openness can also help by improving business climate through access to modern capital and technical know-how; and lead to sustained economic growth in Pakistan.

Estimating the Effects of Social Safety Net Programmes in Bangladesh on Calorie Consumption of Poor Households

Author: MOHAMMAD MAHBUBUR RAHMAN*

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The Social Safety Net (SSN) programmes play a key role in Bangladesh to protect the poor households from food insecurity. This study examines the effect of these programs on calorie consumption of poor households using the 2005 Household Income and Expenditure Survey data. Three treatment effect evaluation designs are applied to compare the estimated effects. Mean difference and matching estimators that do not consider endogeneity of treatment dummy produce significant negative effects when applied to the whole sample. Unconfoundedness and overlap assumptions do not exist and the assumptions are satisfied after dropping some observations using the criteria of propensity score. The effect of the SSN programmes on calorie consumption is estimated in the reduced sample using the same econometric methods, and it is found that there are insignificant positive effects in all cases. However, the treatment dummy has serious endogeneity problem, as selection for treatment is also determined by some unobserved factors such as corruption. In this case, instrumental variables regressions taking regional dummies as instruments that do not have relation with calorie consumption are applied, and produce significant positive average treatment effect.

Determinants of Trade Balance of Bangladesh: A Dynamic Panel Data Analysis

Author: M. ZAKIR SAADULLAH KHAN * M. ISMAIL HOSSAIN **

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Under the new perspective of the world economy, the relationship between the determinants and the overall trade balance of a country in conventional models may not necessarily be the same as with bilateral trade balance. This paper develops a new approach to trade balance modeling that captures the effects of the factors suggested by the conventional model and explores the dynamic relationship between variables of the new model. Using recently developed dynamic panel data analysis techniques, the approach is empirically tested for Bangladesh’s trade with its 50 major trading partners for over 26 years and finds the existence of cointegration, that is, stable long-run relationship between variables of the new trade balance model. Short-run dynamics also show convergence, using Unrestricted Error Correction Mechanism (UECM) and Generalized Method of Moments (GMM) estimator.

Can Proxy Means Testing Improve the Targeting Performance of Social Safety Nets in Bangladesh?

Author: IFFATH A. SHARIF*

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This paper develops and discusses a Proxy Means Test (PMT) based household targeting system for Bangladesh.  The PMT model derived from household survey data includes observable and verifiable characteristics on (i) household demographics and characteristics of household head; (ii) ownership of assets; (iii) housing quality, and access to facilities and remittances; and (iv) location variables in a formal algorithm to proxy household welfare. Simulations of the model suggest that the proposed PMT formula is able to improve the targeting efficiency by a considerable amount when compared with existing targeted safety net programmes. However, numerous implementation challenges remain which include but are not limited to a cost-efficient data collection process, effective management of information and a feasible and cost-efficient monitoring and verification system to minimise fraud and leakage. 

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