Abstract
In recent years Pakistan has faced a rapidly growing services sector which has lead some observers to believe that there is a transfer of resources occurring in Pakistan from the tradable to the non-tradable sector, hence causing the Dutch Disease in the economy. However no precise response has been offered on this subject. This paper seeks to provide empirical evidence on the question of the existence of Dutch Disease in Pakistan by using Linda Kamas's model on Dutch Disease. The percentage change in the growth of the tradable and the non-tradable sectors in Pakistan is calculated by using data from the Economic Survey of Pakistan from the Fiscal Year (FY) 1995-1996 to the FY 2006-2007. It is found that although the non-tradable sector growth has increased by a little larger amount than the growth of the tradable sector, there is still steady increase in the tradable sector growth. Hence empirical evidence indicates that the Dutch Disease does not exist in Pakistan.
Highlights
The services sector has been gaining considerable importance in Pakistan's economy in the recent years
The scenario has rapidly been changing over the period of time and the services sector has steadily been gaining more significance. In such circumstances some observers feel that the Dutch Disease has been taking root in Pakistan in the aftermath of the changes that have been taking place after the attacks of September 11, 2001
The research conducted to investigate the hypothesis of this paper uses the replication of a model that was originally used by Linda Kamas (1986) [qtd. in Sachs & Larrain (1993)]. to study the "Dutch Disease economics and the Columbian Export Boom," and was published by the World Bank
Summary
The services sector has been gaining considerable importance in Pakistan's economy in the recent years. On the other hand, during the 1990s the manufacturing sector had been the major source of driving Pakistan's GDP growth Both the large and the small scale manufacturing had experienced considerable positive growth. Along with this the agriculture sector had contributed positively towards the GDP growth rate in most of the years during that period. The scenario has rapidly been changing over the period of time and the services sector has steadily been gaining more significance In such circumstances some observers feel that the Dutch Disease has been taking root in Pakistan in the aftermath of the changes that have been taking place after the attacks of September 11, 2001
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