The Role of Human Capital Formation in Poverty Mitigation: A Co-integration Analysis from Pakistan

Abstract

The present study tries to explore the dynamic relationship between human capital formation and poverty mitigation by adopting the course of investment in education and health substances. For this sake, study takes heath expenditure and infant mortality rate as health indicators while status of education is captured with literacy rate and enrollment in higher education. Time series data is employed ranges from 1973-2013. The properties of time series data are inspected with the ADF test whilst PP test is employed for the robustness of unit root results. Mixed order of integration of data compels us to make use of ARDL technique for the estimation. Similarly, one unit change in health expenditures lead to reduce 0.251 units of poverty and one unit change in infant mortality cause to reduce poverty by 0.04 units. In last, one unit increase in literacy rate changes 1.03 units in poverty and one unit change in higher education results in 0.003 unit's change in poverty. The results of the study leave us with a clear finale for an optimal policy formulation that, Pakistan is in sturdy need of investment in health and education substances for a noteworthy accumulation of human capital for a right way poverty mitigation policy.