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Economic
development of less developed countries has received enormous
attention since World War II. A large number of studies
have attempted to understand the internal structure of
economic backwardness of less developed countries including
Pakistan.
Prudent
monetary and fiscal policies, efficient use of foreign
direct investment, honest bureaucracy and transparent judiciary
system, political stability civil liberty, well enforced
property rights, democracy, availability of potable water,
sanitation and roads, clean environment, and many more
are held responsible for reducing backwardness of any society.
However, for a large number of countries these statistics
(now referred to explicit indicators) have failed to explain
the growth differentials.
For
example, in year 2000-2001 Sri Lanka citizens had a literacy
rate close to 98 per cent but their GDP per capita (PPP)
was $3560 which is even less than average per capita income
($3930) of low and middle income countries.
Similarly,
the adult literacy rate in Bolivia is 86 per cent but their
per capita income (PPP) is $2380. Scholars are now considering
the efficacy of these explicit indicators with a significant
degree of skepticism.
It
has been observed that countries such as Costa Rica, Columbia
and Nicaragua with similar literacy rate and life expectancy
have experienced different levels of per capita income.
Similarly,
China and Indonesia both have similar adult literacy and
life expectancy but with $4260 and $2940 per capita income
respectively. We have examples of countries that grow much
faster despite having similar explicit indicators.
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