STATE CAPACITY AND TRADE GROWTH IN PAKISTAN: AN INSTITUTIONAL AND EMPIRICAL ANALYSIS

Povzetek

Trade growth is widely regarded as a central engine of economic development; however, its sustainability depends critically on the institutional and administrative capacity of the state. In many developing economies, trade liberalization has not generated expected outcomes due to weak governance, poor regulatory enforcement, and limited bureaucratic effectiveness. This study examines the relationship between state capacity and trade growth in Pakistan over the period 1990–2022. Drawing on developmental state theory and institutional economics, the study conceptualizes state capacity through governance indicators such as government effectiveness, regulatory quality, and rule of law. Using time-series econometric analysis, the findings reveal a statistically significant and positive relationship between state capacity and trade growth. The results suggest that Pakistan’s limited administrative efficiency, regulatory instability, and governance weaknesses have constrained its ability to benefit from global trade integration. The study concludes that strengthening state capacity is essential for achieving sustainable, trade-led economic growth in Pakistan.