Analysis of Infrastructure Investment and Institutional Qualityon Living Standards: A Case Study of Pakistan (1990-2013)

In this study, the relationship of Infrastructure Investmentand Institutional Quality (CIM) on Living Standards of people wasanalysed for Pakistan. This paper comprises of trend analysis ofinstitutional quality for different periods of governments of Pakistancoupled with an empirical analysis of the model. The empirical estimatesare comprised of unit root test, Johansen Cointegration, VAR analysisand Granger Causality tests for the sample of 1984– 2013. The trendanalysis depicts fluctuations of Institutional Quality in differentgovernments due to different political conditions of every period. Theempirical analysis shows that there exists long standing relationshipbetween the Institutional Quality, Infrastructure Investment and livingstandards of people. However, the VAR analysis shows that thecoefficients of only Institutional Quality and Living Standards ofPeople (previous year i.e. lag variables) resulted significance inaffecting living standards of the people. The Granger causality resultshows bidirectional and uni-directional relationships among variables.The results in our study indicate bi-directional relationships of LivingStandards of People (GDPC) with Institutional Quality (CIM). Secondly,CIM and Infrastructure Investment (Developmental Expenditure) are havinguni-directional relationship. Thirdly, Population and InstitutionalQuality (Contract Intensive Money) are having uni-directionalrelationship. Fourthly, GDPC and Infrastructure Investment carry auni-directional relationship. JEL Classification: E02, F41, H53, O1, O4,P23. Keywords: Institutional Quality (Contract Intensive Money (CIM),Infrastructure Investment (Developmental Expenditure), Trade Openness,GDP per Capita, and Population.