Growth and income inequality effects on poverty: The case of Pakistan (1988 –2011)

Haroon Jamal
2015

Summary

This study scrutinizes Pakistan’s statistics on growth, poverty and inequality in terms of poverty decomposition into growth and distribution components and assessment of growth in terms of its distributional neutrality with the help of widely-used statistical tools. Decomposition of poverty into growth and inequality components answers the question of what poverty outcomes would be under distributional neutrality.

The results presented in this research suggest that unequal distribution has blunted the poverty impact of growth in a high-growth poverty-reducing episode. The findings in terms of coefficients of growth and redistribution suggest that overall growth was the main cause for the increase in the poverty level during the period of analysis. On the contrary, the redistribution component provided a cushion to prevent poverty to rise even further.

Two growth episodes are examined in term of pro-poorness. High economic growth that occurred during the early 2000s led to poverty reduction but was not accompanied by lowering inequality. The evaluation of growth during 2001-2005 suggests that the rich benefited much more than the poor. This eventually resulted in a lower reduction of the poverty incidence. On the contrary, the poor have been more adversely affected during a low growth scenario during the period 1988-98. The estimated results regarding the measurement of pro-poorness of growth suggest that the nature of growth is not pro-poor in Pakistan.

Pakistan’s evidence supports the thesis that economic growth alone does not guarantee sustained poverty reduction. The evidence of high growth during the period 2001-2005 in Pakistan clearly indicates that without equity consideration, the benefit of growth may impede the rate of poverty reduction. For ‘pro-poor growth’ to take place, policies must be both pro-growth and pro-equity.

Source

Jamal, H. (2015). Growth and income inequality effects on poverty: The case of Pakistan (1988 –2011) (Research report no. 94). Karachi: Social Policy and Development Centre.