It is acceptable to acknowledge that the important objective of any modern nation is to increase the living standards of its people and to improve within its territory the individual and general well-being. Living standard is mainly fall into the category of wealth level, material of goods and basic necessities for life. It comprises of basic factors of material which include people’s income, gross domestic product, freedom of religion factor, expectancy of life and opportunities available in economies. Its quality of life which also conclude factor of politic, quality of environment and safety for the people living in the country. In recent years Standard of living is considered as the major indicator of economic growth in Pakistan. Standard of living means quality of life and economic condition of people in a country. Each economy has main objective to achieved high level of standard of living and for this purpose they implemented different macroeconomic policies in order to achieve that.

Since 1990s per capita Standard of living growth rate of Pakistan show positive trends but these are quite low when compared it with other Asian economies. There are several economic factors that have influence living standards of people. Standard of living of Pakistan has increasing but as compared to the other economies it is not that satisfactory.

Quality of institutions play a major role in the development of economical position. Quality of institutions is the vital determinant of speed of the development of the economy. Institutions fall in two category one is formal and the other one is informal institutions. Legal and system of judicial fall under the formal institutions and culture values and beliefs fall under the informal institutions. Institution being effective and well manage lead to the advancement in efficiency and competition in interaction in between public and private agents of economic. Which will lead to the high level of increase in the amount of investments, national savings and capital investment and well established management and led to raise living standards of people

It is resulted and proved that Pakistan is going through the institutional decay in 1990s. Which lead to the increase in inefficiency of system of economy. However, the major problem is corruption that affected the institutional quality of Pakistan. Pakistan’s ranking on quality of institution indicators i.e effectiveness of government, rule of Law and political stability is on average in Asian countries In 2013, Pakistan ranked on 127th out of 177 countries due to lack of law and order situation, poor governance and high corruption rate.

These indicator for the determination of quality of the institutions shows that Pakistan is among the country where quality of institutions is at there lowest level. Corruption control is only the indicator that seems some improvement in last couple of years. By looking at the recent environment of institutions there is two options which need to be focused to have some improvement in the quality if institutions. First way for improvement is to evaluate the process of change in institutions. Second option is to implement effective policies to make the current institution more effective.

The article indicate if there would be mismanagement in the quality of institutions, corruption and law and orders then it will increase the budget deficit which will considered as the diverse effect on the standard of living in Pakistan. Government should emphasize great step in management of law and orders, institutional quality to improve the economic system in the country and raise living standards. The better the institutions are, the higher the output is generated. It leads to higher per capita income of people which lead to better living standards.