Abid A. Burki

Impact of financial reforms on efficiency of state-owned, private and foreign banks in Pakistan

This article uses a unique bank level data from 1991 to 2000 and evaluates how financial reforms affect banking efficiency of domestic and foreign banks in Pakistan. The results suggest that banking efficiency falls during initial reform period when banks adjust to enhanced competition but increases in more advanced stages of reform. While in general foreign and private banks show superior efficiency and factor productivity than do state-owned banks, the relative performance of foreign banks worsens after the consolidation stage of the financial reforms is over. We show the importance of link between bank size, asset quality and bank branches with efficiency indexes and also note that every 10% increase in share of nonperforming to total loans decreases banking efficiency by 6 to 10%.

Parametric tests of allocative efficiency in the manufacturing sectors of India and Pakistan

This paper estimates allocative inefficiency in the manufacturing sectors of India and Pakistan. Based on an extension of the translog profit function approach, we propose a new method to the estimation of allocative inefficiency in two countries (or groups). The model is estimated using pooled annual data from the large scale manufacturing sectors of India and Pakistan over the period 1959-87. We find evidence of allocative inefficiencies in both countries. Specifically, results reveal that manufacturing firms in the two countries over-utilize capital and raw materials relative to labour and energy. The magnitude of over-utilization of capital is more severe in Pakistan than in India. We argue that these findings are hardly surprising given the structure of factor markets and past government policies in the two countries.

Banking deregulation and allocative efficiency in Pakistan

ABSTRACT This article examines the impact of deregulation policies on allocative efficiency of banks in Pakistan. It investigates whether deregulation has impacted the pattern of allocative efficiency of banks and explores which bank ownership segment has been more responsive. It uses data from 1991 to 2005 and explicitly models allocative inefficiency by using the translog shadow cost-share system. Empirical results show that overregulation and imperfect market structure hampers the ability of banks to make competitive decisions. We find evidence of allocative inefficiency leading to over-utilization of labour and deposits vis-à-vis operating cost. Empirical results for time-varying allocative efficiency show declining levels of allocative inefficiency for state-owned and private banks in post-reform period. Deregulation policies induce state-owned banks to decrease over-utilization of labour relative to deposits and operating cost while private banks succeed in using operating cost closer to optimal levels. Hence, policymakers have latitude to introduce more reforms without jeopardizing allocative efficiency.

Group-based BDS matching grants and farm-level outcomes in Pakistan

Matching grants that entitle enterprises to business development services (BDSs) are common in developing countries, but to date, no rigorous impact assessment of these interventions has been carried out. Using data of small farms from Pakistan, this article investigates how group-based BDS matching grants affect farm-level outcomes. Empirical results suggest that these interventions increase the technical efficiency, profitability and employment of treated farms compared with farms in comparison group, but true winners are group leaders who innovate more quickly. Moreover, BDS is not perfectly diffused within farmer groups at least in the short-run.