Informal Markets And Competition: An Analysis Of Barriers To Entry Of Legal Framework And Behavioral Attitude Towards Khokha Markets In Pakistan

Theme/Relevant Ministry:


BISP; District Admin in Punjab, KP, Balochistan & ICT

Project Brief:

Khokhas are one of the key segments of informal economy in Pakistan. Khokhas provide jobs to many people and provide easy access to consumers for doing various types of transactions. However, on average one observes a very unorganized and shabby structure of the Khokhas across Pakistan. This creates a question in mind of everyone that why this is the case. Is everyone allowed to start khokhas in any market of Pakistan or there exist some legal framework? We aim to provide answer of this question. The analysis of legal framework is important for understanding the barriers to entry and thus competition in the khokha markets of Pakistan. In addition, we examine the behavioural side of the people associated in some capacity with the khokha markets. We aim to test whether legal side is more deterring than behavioural side of the associated people for entering to khokha market. For this purpose, we review the available legal framework and collect primary data from the owners of Khokhas in 5 cities of Pakistan. We find that the barriers to entry aspects of legal framework are more dominant than the barriers to entry aspects of behavior of people towards khokhas. There exists no legal framework to obtain a license for establishing khokha in our sample cities. People enter the khoka market with the constant risk and fear of demolishment, fines, confiscations and arrest. We find that the absence of legal framework is one of the major cause of constant harassment of current vendors by public authorities. Hence, is a major behavioral barrier for prospective entrants. Based on regional comparison of laws related to khokhas, we propose a detailed set of policy that could be adopted for creating a formal legal framework for Khokhas across Pakistan.

Public Policy Relevance:

Khokas (small vendors) provide jobs to many people and facilitate consumers in doing various types of transactions. This research examines whether the barriers to entry aspects of legal framework are more dominant than barriers to entry aspects of behaviour of people towards khokas. It reviews the challenges and legal framework that would bar the new entrants into the khokas’ markets in Punjab, KP, Baluchistan and Islamabad.


Final Research Report, Policy Brief and Journal article can be downloaded from the link:

CGP 01-037
Anwar Shah
Associate Professor, Quaid-i-Azam University Islamabad (PI)
10 months
Rs. 2,500,000