The Potential Impact of Exports on Pakistan’s Economy: A CGE Analysis
Keywords:Computable General Equilibrium (CGE) Model, Social Accounting Matrix (SAM), Macroeconomic Indicators, Compensating Variations, Welfare, Inequality and Poverty, Economic Development and Growth, Policy Recommendations
This study intends to submit a quantitative assessment of Pakistan‘s exports in the economic welfare of the country. Using the CGE model and taking the most recent data presented in Pakistan‘s SAM (2010-11), three tests are operated to measure the potential effect of increasing the exports of Pakistan. Exports have been raised by 4%, 8% and 12% in simulation I, II, and III respectively. This research covers the effects of an increase in exports on almost all the key variables along with welfare, inequality, and poverty. The positive impact is found on Pakistan‘s macroeconomic indicators like; GDP, Household Income, Public and Private Consumption, Savings and Investment. An increase in the value of Compensating Variation is recorded, which indicates an increase in all the household‘s welfare. However, for non-agriculture households, it has risen more, which indicates the pro-urban effect. Inequality indices have registered a declining effect. Finally, in the light of findings, some policy recommendations regarding reducing income inequalities, poverty alleviation and economic development and growth strategies are stated.