Governance, Economic Growth and Socioeconomic Development in Pakistan

Abstract

The interrelationship of governance quality, economic growth and economic development is an important area of research in the development field. The previous studies are based on single equation estimation techniques and provide evidence on bidirectional relationship of these variables. Furthermore, most of the studies use a narrow concept of development using single variable or HDI as a measure of human capital or socioeconomic development. The present study constructs a broader socioeconomic development index by incorporating twelve indicators each for social and economic development. This study is an attempt to fill up this gap in existing literature by estimating tripartite relation of governance, economic growth and socio-economic development by applying system method of estimation. The study examines the relationship of governance, economic growth and socioeconomic development using 3SLS approach that yields low variance estimates than limited information method for Pakistan economy for the period 1990-2017. The results reveal bidirectional positive relation of governance- growth and growth-socioeconomic development nexus. As for as governance-socioeconomic development nexus is concerned, it shows that there exists a negative bidirectional relationship. It implies a weak capacity of the government in providing service delivery to the society. The study suggests an improvement in the quality of governance in Pakistan for the uplift of socioeconomic development conditions.