Globalization Impact

Impact of Globalizationon The Welfare State of Pakistan
A thesis submitted
By
Faizan Hussain (8141)
To
Department of Business Administration
In partial fulfillment of
The requirement for the
Degree of
MASTER OF BUSINESS ADMINISTRATION
In
Finance
This thesis has been
Accepted by the faculty
FACULTY OF BUSINESS ADMINISTRATION
Syed Ali Raza

Advisor
Syed Ali Raza

Manager Research
Acknowledgment
Firstly, I would like to express my sincere gratitude to my supervisor Mr. Syed Ali
Razafor the continuous support in completing my Thesis and related research, for his
patience, motivation and immense knowledge. His guideline helped me in all the time
of research and writing of the thesis. I could not be able to complete it without his
advisory. Besides my advisor, I would also like to thank to Mr.Arshiyaan for their
valuable guidelines related to my research work. I thank my class colleagues for the
stimulating discussions, their views and suggestions and for all the fun we have had in
our entire session of Thesis. Last but not least, I would also like to thank my parents
and siblings. They were always supporting me and encouraging me with their best
wishes including my Manager for approving my casual leaves for the Thesis work.
Table of Contents
Acknowledgment....................................................................................... i
Abstract................................................................................................... iii
Chapter # 1................................................................................................. 1
Introduction................................................................................................. 1
1. Introduction.......................................................................................... 2
1.1 Background........................................................................................ 2
1.5 Scope of the Study............................................................................. 4
1.6 Limitation of the Study.......................................................................5
Chapter 2..................................................................................................... 6
Literature Review......................................................................................... 6
2. Literature Review................................................................................. 7
2.1. Theoretical Background.....................................................................7
2.2. Empirical Studies............................................................................... 9
Chapter 3.................................................................................................. 18
Methodology............................................................................................. 18
3. Methodology....................................................................................... 19
3.1 Research Approach...........................................................................19
This examination has based upon quantitative exploration procedure
includes the observational investigation of gathered information
strategies It is an examination connected on the numerical type of
information The gathered information changed over in to numbers to
determine it endurably. This methodology is connected when discoveries
of finding of the examination will be recognized is connected when
discoveries of finding of the examination will be recognized by
measurable strategy the study instrument updated was further
presented by distinctive industry experts Likert scale of five point was
produced for everything that mirrored the level to which strategies
utilizes by the buyer to chosen and participated in association with
supplier were measured critical to their sourcing exercise or the level to
which the relationship were fruitful in helping the buyer accomplish its
objective................................................................................................. 19
3.2 Research Purpose............................................................................. 19
3.3 Research Design............................................................................... 19
3.4 Data Source...................................................................................... 19

3.5 Target population............................................................................. 20
3.6 Sample Size...................................................................................... 20
3.7 Collection Techniques/Tools Data......................................................20
3.8 Data collection instrument...............................................................20
3.9 Statistical Techniques.......................................................................20
Abstract
In the research of explanatory analysis the purpose of this exploration is to identify

the impact of globalization on welfare state ofPakistan. For this purpose data over the
period 1967 to 2014 is used to empirically investigate the relationship between
globalization and welfare of the state. Welfare effort is studied in termsof jointly
public spending and taxation. Total trade, imports, foreign direct investment, and
financial market integration are the variables for the measurement of globalization.
Thestudy identifies the benefits and drawbacks of globalization for the welfare of the
stateof Pakistan. This research will help the state of Pakistan to make suitable policies
in order to reduce the effect of globalization.
Keywords: Public Spending, taxation, trade, imports, foreign direct investment.
Impact of Globalization On Welfare Of the State Case Of Pakistan
Chapter # 1
Introduction
1. Introduction
1.1 Background
The government which spends on goods and services for the welfare of
the public of the state is termed as welfare state. In this paper we
determined welfare of the state as public spending, social service
provisions, income transfer programs and taxation. Government do public
spending from its earnings and it includes spending on the basic needs of
the public like food, education, employment, health, safety, social services
and income transfer programs. The government major earnings are
generated by its taxation system so therefore they collect taxes from
individuals, AOPs and companies which make them able to spend on
public welfare. On the other hand, welfare of the state is interrelated with
globalization. Globalization has the impact on the whole of the economy of
the country in terms of social, cultural, political and economic aspects. It is
defined as a process of rapid economicintegration among countries driven
by the liberalization of trade, investment and capital flows, as well as
technological change [Torres, R (2001)]. Globalization has increased its
Importance now days. ORourke and Williamson (2000) point out that the
world economy even by the late 20th century standard was well
integrated in the beginning of the twentieth century [Kemal (2001)].World
economies were tend to move towards globalization after the first world
war and the golden years of the 1950s and 1960s.After the second world
war WTO(World Trade Organization) is formed in continuation with ITO
(International
Trade
Organization)
to
help
and
support
liberalism,
multilateralism and nondiscrimination. This then shows a tendency

towards globalism [KatsuniSugiura (1999)]. In this paper we analyzed
Globalization in terms of total trade, imports, foreign direct investment,
and financial market integration. The relationship between globalization

and the welfare state is highly composite, economic internationalization
has greater implications and it needs to be understood for the long-term
sustainability of welfare states. This article aims to clarify some of the
theoretical and empirical contradictions and also to point out a simple fact
that is, arguably, not always acknowledged in the relevant literature. The
alliance between globalization and the welfare state is highly unexpected
and active, i.e., it changes over time. Welfare state policies must be
adaptive with regards to economic internationalization in respective areas
of importance like trade, imports, foreign direct investment and financial
market integration. Welfare of the state is concerned with large number of
policy fields and globalization has affected those fields differently from one
another so in order to control the effect of globalization state needs to
make relevant policies. Three schools of thought that have dominated the
scholarly
debate
in
the
past
decades
are
introduced:
first,
the
compensation thesis, they show the result that the globalization has
positive effect on the expansion of welfare state, which is totally against
the results of efficiency thesis i.e. the negative relationship. Skeptics the
third school, they claim that the effect of globalization on welfare of the
state is weak or nonexistent as the domestics politics and institutions has
greater impact.
1.2Problem Statement
What collection of welfare state policies enables us to balance the trash
from globalization without harming motivation to work and obtain talent?
What is the suitable position of the state in the condition of welfare
services? Many Researchers have identified the importance of the topic of
globalization impact on welfare of the state, (Naima Saeed 2006) this

paper show that it is extremely important to identify the relationship
between globalization, economic development and social progress.
(Bonaglia et al., 2001) How to incorporate globalization with governance
concerning globalization a key unsettled issue. Impact of Globalization on
Governance is still a controversial issue and needs to be resolved.
Bonaglia et al. (2001) it is argued that an important aspect of governanceglobalization nexus is a connection of trade openness to domestic
institutions. The state required to liberate authority because of the
demands on the state to shift towards globalization and for making
business decision state control above the provision of information,
communication and to authorize global organizations (Saich, 2000). As the
socioeconomic and political implication of globalization is very firm, the
debate on this topic is expected to go on for years. Every time when any
meeting is held at World Trade Organization, IMF, or World Bank platforms,
the discussion is divided into the group and rival of globalization and
consent
on
the
effects
of
globalization
remains
an
unattainable
assignment (Akhter, 2004). In the face of this uncertainty, this study is an

attempt to lend an empirical support to this ongoing discussion in
particular reference to its effects on welfare of the state and quality of
institutions of economies, to understand why globalization should affect
the quality of state policies regarding public spending, social service
provisions, income transfer programs and taxation system in Pakistan. In
this paper I use high frequency data to examine the connection between
globalization and welfare of the state of Pakistan.
1.3 Research Objective

The objective of this paper is to help improve understanding of the
effectsof the globalization on the welfare of the state in terms of

government policies related to public spending, social service provisions,
income transfer programs and taxation of Pakistan.
1.4 Research Question

Canglobalization be seen as positive or negative for the Welfare State
of Pakistan?
1.5 Scope of the Study

The scope of this research is to identify advantages or disadvantages if
any of the globalization on welfare of the state in Pakistan. Globalization
has had a dual effect on the welfare of the state. Since 1945, in a
normative structure of individual rights a part of the state towards its
citizens implanted a sense of responsibility.Over a certain region Welfare
of the state is the supreme power, by a number of forces operating
beyond the nation state this supreme power has been challenged by these
forces such as the threat of global terrorism, the challenges of climate
change, and the powers of international organizations to influence on the
global market, given the impact on thenational economic policy of the
global financial crisis. More clearly globalization of economy has been
restraining the capability of states to decide their own policy related to
trade, economic integration and financial markets.States are forced to cut
labour costs, decrease the price of goods and services and reduce tax
rates to make their domestic market more competitive, and to shrink the
size and scope of the welfare state because of the rising pressure of
international rivalry in trade markets as well as the increased mobility of
capital and multi-national businesses.
1.6 Limitation of the Study

This research has its limitation of evolving only around State of Pakistan.This has the
span of 48 years besides lacking time and budget, data has been collected from the
source website of state bank of Pakistan.
Chapter 2
Literature Review
2. Literature Review
2.1. Theoretical Background
In the middle of the previous two decades, most industrialized nations have
encountered real changes in their welfare frameworks as a result of restricted financial
development. This, thusly, has prompted an assortment of endeavors to change the
establishments of the welfare state in numerous nations. Globalization achieved
another connection for welfare approaches. Globalization implies not just changes in
the properties of countries, for example, increment in the measures of exchange and
coordinates outside venture, additionally changes seeing someone among countries. It
is a generous worldwide move that develops the interdependency among countries
and increases rivalry between them. A key supposition basic the present study is that
globalization has set gigantic weights on countries to seek after more effective and
adaptable operations of their economies.
Between the 1980's in Anglo-Saxon nations, for example, the U.S and U.K.,
"Reaganomics" and "Thatcherism" are illustrative instances of the conservation of the
welfare state. Conversely, Sweden and Germany have kept up their past welfare
frameworks, picking incomplete change, as opposed to conservation. Extensions of
welfare strategies have additionally been seen in a few nations, for example, Spain,
Portugal and Korea.
2.2 Empirical Studies
There are huge literary works on the issues of globalization effects on welfare
of the state. Because of Globalization national economies are turning out to be bit by
bit uncovered, subordinate with different nations and receptive to universal monetary
effects (Mishra, 1998). In the period of globalization, Hirst and Thompson (1996)
affirm, national economies stop to exist on the grounds that they are subsumed into
the worldwide monetary framework. Creation gets to be worldwide, companies get to
be stateless, and national governments can no more manage or control these
worldwide partnerships.
As a nation's welfare approaches had for the most part been reliant on a
generally shut economy, globalization gives new weights and difficulties to welfare
states. As to effects of globalization on welfare state, there are two primary inquiries
(Mishra, 1998). To start with, does expanding financial openness and interdependency
between countries deny country conditions of their strategy self-governance - the
capacity to make social approach in its own way? Second, does globalization decrease
the welfare state as countries contend with each other in the universal commercial
center?
With respect to inquiries, late studies can be ordered into three camps. Some
contend that the opening of economies has reduced the self-rule of country states to
decide monetary and social approach identified with full business and financial
development (Mishra, 1998). A neoliberal contention asserts that universal rivalry
makes economies with liberal welfare states uncompetitive and requires more
productive and little governments (Pfaller, 1991; Pierson, 1991).
These obliging impacts of globalization highlight two components (Garrett
and Mitchell, 1999); 1) expanding rivalry in worldwide markets 2) the capacity of the
capital holders to move cash and generation around the globe in quest for higher
returns. Expanding rivalry makes a weight on cost effectiveness and interest for
government to diminish the expense of welfare strategy. The 'footloose capital' can
without much of a stretch sidestep the expense of expansive welfare state by leaving
the nation. Governments must choose the option to acknowledge the requests of
business sectors and diminish welfare state policies. Thus, this viewpoint proposes
that globalization has undermined social security and additionally full occupation and
generously compensated employments. Garrett &Mitchell (1999) call this point of
view a 'productivity theories.
A second gathering of researchers contend that, despite the development of
globalization, the impact on rebuilding of welfare states is unassuming (Schwartz,
2001). Defenders of this methodology contend that the part of government won't be
debilitated on the grounds that there is justifiable reason purpose behind government
intervention. As per Garrett & Mitchell (1999), this methodology is known as a
'remuneration speculation's and clarifies why there won't be a decline in the welfare
state. This point of view spotlights on the issue created by globalization and the
positive reactions of governments (Katzenstein, 1985; Rodrik, 1997). As business
sector combination tends to expand imbalance and financial insecurity, it makes solid
motivating forces (or requests) for governments to decline market separation utilizing
welfare state policies. Vulnerability to outside monetary stuns empowers the

development of a liberal social security net to shield subjects from such stuns
(Cameron, 1978). Expanding welfare state endeavors mitigates market weights and
keeps up open backing for globalization.
At last, defenders of a third point of view, including Iverson (2001) and
Pierson (2001), are more farfetched about globalization's consequences for national
endeavors to change their welfare systems. This approach additionally concentrates on
national politics and hobbies of related on-screen characters and takes a perspective
that the impacts of globalization are interceded by residential welfare state courses of
action. Fancy (1998) contends that market-arranged liberal welfare states (Canada,
U.S., Australia, and U.K.) have been under descending weights by capital portability
while the weight are either missing or positive in Continental Europe (Germany, and
France) and Scandinavian nations.
In addition, they underline that a considerable lot of the weights on the welfare
state are wrongly ascribed to globalization. For instance, Iverson (2001) states that
'post-industrialization' - move into an administration bases economy - instead of
globalization is a more significant driving force of the late change.
The principal camp expects that globalization has changed the general
situations of welfare state procurement. Notwithstanding, this contention neglects to
clarify how the effects are exchanged to individual nations and why there are
distinctive reactions to these worldwide weights. The second endeavors to supplement
the deficiencies of the 'efficiency thesis. Expecting the positive part of government,
they attempt to discover mediating components that impact the determination of
particular national procedures. Regardless of an alternate contention, the third camp
10
represents that household organizations are significant in intervening the effects of

globalization.
This study is an endeavor to consolidate these contending hypothetical
viewpoints on the impact of globalization on changes in countries' ways to deal with
transforming their welfare states. Concerning outer impacts of globalization, system
investigation makes it conceivable to clarify the general changes in universal relations
and produces a 'globalization marker, for example, 'worldwide exchange requirement'
and 'worldwide speculation limitation' variables, which measure the level of
imperatives for every country in a globalized economy.
Countries don't exist autonomously however consistently interface with
different countries in the worldwide system. Exchange and remote direct speculation
are ordinary monetary exercises between countries. Despite the fact that there has
been an agreement on the meaning of globalization underlining the feature of
developing interdependency between countries, most estimations of globalization
utilize the characteristics of individual countries, for example, the measures of
exchange and the volumes of streams of outside direct venture (Huber, Ragin and
Stephens, 1993; Garrett and Mitchell, 1999; Huber and Stephens, 2001).
Going before studies on globalization impacts endeavor to clarify the variety
of government uses and incomes utilizing these variables. These studies are defective
in that they don't make note of the impact of changing worldwide systems in which
every country is installed. The outside impact of globalization is decreased into
properties of every country and these estimations overlook the dynamic procedure of
globalization.
Countries are working in the limitation of worldwide exchange system or
worldwide venture system. The worldwide exchange system, which comprises of the
11
connections among fare and import countries, impacts every country. A country
copious in iron, for instance, trades it to different countries requesting it. These
ceaseless exchange game plans, for example, importing common assets and sending
out items, constitute worldwide exchange systems. Globalization, as far as exchange,
means
expanding
exchange
among
countries
and,
therefore,
improves
interdependency among countries. The worldwide speculation system is like this.

Globalization expands the thickness of worldwide exchange organizes and
influences the reaction of every country. The position of a country in the system
impacts the example of rivalry. It additionally affects chances to expand the
opposition advantages and return of speculation. The exchange system lets us know
something imperative, for example, how exchange benefit will be disseminated
among countries include in it. There are spots where the items can be sold for
significantly more than it expenses to make it. The more the quantity of other remote
nations that import or trade the items and the more they are disrupted and don't have
cozy connections among them, the more the country takes a self-ruling status among
them. More independent position of the nation empowers it to arrange more good
costs, and appreciate more noteworthy measure of exchange edge than less selfgoverning nations (or more obliged nations). At the point when the country can
arrange an extraordinary manage import nations or shift the exchange to less costly
import nations, the country can build the exchange income. Then again, a country
under high limitation (or low-self-sufficient) from other overwhelming exchanging
nations experiences issues in arranging beneficial terms. High-limitation countries
will have a minority offer in the exchange income. Along these lines, the structures of
exchange system and the area of every country impact the country's odds of getting
higher income from exchange.
12
Worldwide exchange imperative is an idea that breaks down the level of

limitation that originates from worldwide exchange system and the area of the country
in it. Which position a country takes is the way to achievement in the exchange
rivalry. Particularly a business position is an imperative asset accomplishing rivalry
advantage in light of the fact that country going about as agent can control the
arrangement, which supports it in the systems in which other taking an interest
countries have no associations. The business has educational and control preferences
that help the opposition dominancy (Burt, 1992).
In this way, to know which position a country takes in the worldwide
exchange system will help us to comprehend the exercises of the country. This study
expects that the impact of globalization relies on upon the position of every country
and the level of worldwide requirement every country faces.
How does the worldwide system structure influence welfare state endeavors?
The attributes of the worldwide system and one's position in it impact the key
reactions of the countries and influence what sort of welfare state strategy the country
will embrace.
Reviewing the "effectiveness" and "pay" speculation, the welfare approach of every
nation is impacted by the general system structures and the position of the country in
it. At the point when a country is intensely compelled by different countries, it is
liable to embrace a uninvolved adjustment technique, which conforms it to the
requests of cash-flow to ask productive and little government. In this manner, welfare
state arrangement will take a productivity interest technique that streamlines the
welfare cost, which brings about bringing down welfare state use.
Despite what might be expected, nations holding a predominant and self-ruling
position with less limitation in the worldwide exchange system, will take a more
13
positive procedure, which concentrates on legitimating and keeping up financial

dependability. For whatever length of time that an association is not under the danger
of serious rivalry, it doesn't look to augment effectiveness (Leibenstein, 1976). The
country endeavors to acquire authenticity from an outer situation and also national
legislative issues. Utilizing expanded incomes from exceptional yield on outside
exchange, the nation actualizes liberal welfare state approaches to settle itself and
keep up an upper hand in worldwide exchange. Along these lines, less compelled
nations are liable to give more liberal welfare state uses.
The examination above spotlights on the impact of the worldwide systems and its
progressions on the welfare state endeavors. Without talk of the part of government
and hobbies of related gatherings, in any case, the contention has an issue of
exorbitantly underlining the deterministic impact of outer situations. Supplementing
examination on the interior governmental issues and institutional design of welfare
state could take care of this issue. These variables, which influence welfare state
endeavors, are (a) political gatherings (b) state structures (c) ladies' work power
support.
Korpi (1989) contends that varieties in welfare state consumption and privileges
among created nations could be clarified by the achievement of left gatherings,
especially social majority rule parties, unified with solid exchange unions. As
indicated by Huber and Stephens (2001), factional governmental issues are the most
imperative element that records for the variety in welfare state results crosswise over
nations. The prevailing political range of the occupant government: social vote based,
Christian law based, or focus and right are essential determinant of the sort of welfare
state.
14
The cooperation between a solid union and social just gathering is a persuasive
element of more generous, more universalistic, and more redistributive welfare state
(Korpi and Palme 1998; Huber, Ragin and Stephens 1993). In Christian popularity
based nations, Christian just gatherings endeavor to activate a working and bring
down middleclass, especially when confronted with rivalry from left gatherings and
unions for the average workers voters. These gatherings are real promoters of welfare
state development.
b) State Structures: Veto Points and Changes in Welfare State
The structure of choice making coming about because of established procurements
impacts the rebuilding of the welfare state (Huber and Stephens, 2001). Talking about
the medical coverage approaches in Switzerland, France and Sweden, Immerged
(1992) contends that political establishments shape the capacity of distinctive
gatherings to activate power assets and impact the making of the strategy.
Constitutions which make numerous "veto focuses" in the arrangement process - e.g.
solid bicameralism, presidentialism and federalism, - moderates the pace of approach
change, though constitutions with few or no veto focuses - unicameral, parliamentary
- empowers more quick strategy changes (Huber and Stephens, 2001). Amid the
rebuilding period, just countries with a couple veto focuses and preservationist
governments experience emotional conservation. In actuality, for instance, Swiss with
different veto guides drove toward the left blocking welfare state conservation
arranged by government (Huber and Stephens, 2001).
In Scandinavian nations, the larger amounts of ladies' work power cooperation have
consequences for welfare state development through requests for better welfare state
administrations and association with steady partners, for example, social majority rule
party (Huber and Stephens, 2001). Expanding ladies' interest produces requests on
15
family mind administrations, for example, general society procurement of day

consideration and elderly care and parental leave protection. Extension of social
administrations, thus, positively affects ladies' work power investment in light of the
fact that it empowers more ladies to take an interest in the work constrain and makes
requests for work around there. In this manner, the procurement of social
administration actuated a self-strengthening process (Pierson, 2000).
In opposition to Scandinavian countries, a few mainland European (or Christian vote
based) nations commonly give liberal money advantages to families keeping up the
customary male-provider family show. It suggests there is a probability that these
nations give high welfare state consumption while keeping up generally low female
vocation.
Be that as it may, most nations have encountered expanding female livelihood.
Expanding ladies' work power investment is related with the pattern of postindustrialism movement of occupation from assembling to benefit - and maturing
populace. Upgrading ladies' job is used as a vehicle to adapt to diminishing work
power coming about because of maturing populace and in addition to back welfare
state (Myles and Quadagno, 2002)
16
Chapter 3
Methodology
17
3. Methodology
3.1 Research Approach
This examination has based upon quantitative exploration procedure includes
the observational investigation of gathered information strategies It is an examination
connected on the numerical type of information The gathered information changed
over in to numbers to determine it endurably. This methodology is connected when
discoveries of finding of the examination will be recognized is connected when
discoveries of finding of the examination will be recognized by measurable strategy
the study instrument updated was further presented by distinctive industry experts
Likert scale of five point was produced for everything that mirrored the level to which
strategies utilizes by the buyer to chosen and participated in association with supplier
were measured critical to their sourcing exercise or the level to which the relationship
were fruitful in helping the buyer accomplish its objective.
3.2 Research Purpose
To identify the benefits of buyer-supplier relationship in pharmaceutical
industry, Explanatory research is used for this quantitative research.
18
3.3 Research Design

To identify the impact of supplier selection and Buyer-supplier engagement on
relationship and firm performance in pharmaceutical industry we used Co relational
Design.
3.4 Data Source
To recognize the effect of supplier determination and buyer-supplier
engagement on relationship and firm execution in pharmaceutical sector Primary data
collection is used through questionnaire.
3.5 Target population
This study is conducted on supply chain departments of pharmaceutical
industry .so our target population is pharmaceutical industry.
3.6 Sample Size
Our sample size is 251.
3.7 Collection Techniques/Tools Data
To recognize the advantages of buyer supplier relationship in pharmaceutical
industry we used questionnaire survey method.
3.8 Data collection instrument
To distinguish the effect of supplier determination and buyer-supplier
engagement on relationship and firm execution in pharmaceutical sector we used
survey questionnaire (Likert scale) for this study.
3.9 Statistical Techniques
To recognize the effect of supplier choice and buyer-supplier engagement on
relationship and firm execution in pharmaceutical sector we used factor and multiple
regression analysis.
19
20

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Impact of Globalizationon The Welfare State of Pakistan

Syed Ali Raza

Syed Ali Raza

3.4 Data Source...................................................................................... 19

In the research of explanatory analysis the purpose of this exploration is to identify

Keywords: Public Spending, taxation, trade, imports, foreign direct investment.

Impact of Globalization On Welfare Of the State Case Of Pakistan

Impact of Globalization On Welfare Of the State Case Of Pakistan

multilateralism and nondiscrimination. This then shows a tendency

Impact of Globalization On Welfare Of the State Case Of Pakistan

and financial market integration. The relationship between globalization

Impact of Globalization On Welfare Of the State Case Of Pakistan