AN EVALUATION OF TAX EXPENDITURES AND DIRECT EXPENDITURES: CASE STUDY OF PAKISTAN.

This paper evaluates goverment's options of tax expenditures and direct expenditures to augment private investment in Pakistan. The data from the Manufacturing Sector of Pakistan for a period of 1972 to 2013 is used in a bounds testing approach of Autoregressive Distributed Lag model. The empirical evidence shows a strong role of direct expenditure in influencing both short-run and long-run behavior of investment in the economy. The results further demonstrate that under low inflation the tax expenditure policy is more important determinant of private investment, however, in high inflation periods, direct expenditure is found to be more potent. [ABSTRACT FROM AUTHOR]