Political Economy of Fiscal Decentralization and Poverty Mitigation in Pakistan

Abstract

The study examines the effects of fiscal decentralization on poverty mitigation in Pakistan for the time period from 1980 to 2019 through (ARDL) Bounds testing approach. To capture the true nature of fiscal decentralization two indicators have used i.e. Revenue decentralization and Expenditure decentralization, further the role of political stability on poverty reduction is assessed. The empirical finding suggests that expenditure decentralization has increase the level of poverty in Pakistan while revenue decentralization has negative impact on poverty. The study provides the evidence that fiscal decentralization can cater the needs of locals efficiently. Fiscal decentralization is therefore an important policy instrument for reducing the level of poverty in Pakistan.