Pakistan’s 6.7 percent average annual growth rate in GDP in the last decade can be described as impressive even by the standards of the rapidly growing economies in Asia [Government of Pakistan (1987)]. Recent evidence, however, shows that at the national level, the improvements in the social indicators have not kept pace with such economic transformation. The Pakistan National Institute of Health’s national nutrition surveys indicate that the proportion of malnourished children remained roughly the same between 1977 and 1985. In 1985, 10.8 percent of preschool children were below 80 percent of the standard WHO reference weightfor- height (a measure of child wasting or being thin) compared to 8.6 percent in ,1977. About 41.8 percent of the preschool children in 1985 were stunted (below 90 percent of standard WHO height-for-age) compared to 43.3 percent in 1977. These trends appear perplexing given the conventional hypothesis about the direct and positive effects from increases in incomes and availability of food on the nutritional welfare of the household. Expenditure elasticities for calories in urban areas in Pakistan, for example, were found to be about 0.22 on average and 0.40 for the poorest quartile, indicating quite high propensity to increase intake of calories given a rise in incomes especially for the poor [Alderman, Chaudhry and Garcia (1988)]. Similar magnitudes have been estimated for rural areas [Alderman (1989)]. In general, such data suggests that increases in income would automatically translate into the consumption of more quantities and higher qualities of food, and hence into better nutritional status. Food intake, however, ‘is only one of a number of inputs into health production. The effect of changes in food intakes on growth may actually be relatively small at the margin [Behrman et a1. (1988)]. There is, then, some question with respect to the role of incomes, prices, and education for increasing the use of inputs into health as well as uncertainty about the relative role of these inputs into the production of health and nutrition [see Alderman (1990)].