Public Sector Human Capital Investment in Pakistan Is Economics or Politics at Play?

The paper investigates factors responsible for low public sector human capital investment in Pakistan. For economic factors, budget constraint of the government leads to debt burden both in stock and flow forms, which can either positively or negatively affect the public sector human capital investment. To account for this, a Debt Net Cost Index (DNI) has been developed to measure the net cost of public debts that has been shifting from one year to another since 1960. The political factors in terms of regime type, frequency of elections and international aid preferences; elite capture in terms of industrial and military elite burden and institutional factors in terms of institutional quality and propensity of external conflicts have been analyzed. Treating the DNI as a proxy for the economic cost that limits the capacity of the Government to invest in human capital, the paper explores the comparative significance of this economic factor vis-a-vis political factors responsible for low public sector human capital investment in Pakistan.