This study investigates critical constraints to growth in Pakistan using
Hausmann, Rodrik and Valesco’s (2005) decision-tree methodology. The
investigation is supplemented by macro-level and firm-level regression analysis.
The critical constraints identified using the three set of identifications include;
poor institutional quality/poor governance, little foreign inflows, bad financial
intermediation, difficult access to finance, macroeconomic instability, shortage
of energy and poor labour quality as the critical constraints to growth. Joining
the pieces of evidence apparent from the three set of investigations yields poor
institutional quality as one mega constraint—constraints like macroeconomic
instability, little and expensive energy, poor labour quality, bad financial
intermediation and lack of access to finance, all seem to be rooted in poor
institutional quality. We also identify various institutions of Pakistan that
seemingly constrain growth in the country. These include institutions related to ;
plea bargain offered by the National Accountability Bureau to those charged
with corruption, institution for creation of provinces, NFC, political finance,
SROs, post-fecto approval of supplementary budget, bureaucracy, local
government, medium of instruction and the institution for holding population
census timely.