Macroeconomic dynamics and magnitude of poverty: a comparative analysis of different regimes

Abstract

The poverty level in Pakistan has been increasing and despite decades after independence it is still a very critical socioeconomic issue. This study examines the effects of macroeconomic variables (GDP, inflation, unemployment, and tax revenues) on the poverty rate in Pakistan since 1974 to 2014. Moreover, this study also investigated the impact of a different regime i.e. democracy and military regime with reference to macroeconomic variables and poverty rate. The descriptive statistical analysis was carried out by using graphs and inferential statistical analysis was performed using Pearsons correlation and multiple regression analysis. The results showed that the real GDP and tax revenues have significant negative effects on the poverty rate. The inflation also showed a significant positive effect on the poverty rate, which implied that an increase in inflation hurts the poor more and leads to increased poverty. The unemployment rate showed insignificant positive impact on the poverty rate. On the aspect of influence of different regimes i.e. democracy and military rule, the results showed democracy has a negative impact on the poverty rate, implying that the democratic regimes are more favourable for poverty reduction in Pakistan.