Income Distribution In Pakistan Research Articles

Functional income distribution in Pakistan: Co‐integration and vector error correction model analysis

AbstractThis research aims to explore the long‐ and short‐run impact of the functional income distribution variables of Pakistan. Three main variables were analysed, real wage, non‐agricultural wage and operating surplus (OS), as all three are the pillars of the functional income distribution. Annual data were collected from 1986 to 2019 from the State Bank of Pakistan, and time series analysis co‐integration and vector error correlation model have been applied. We found that only two variables, real wage and non‐agricultural wage, are affected in the long run while the OS is not affected in the long run. There is no short‐term effect of any variable except real wage and non‐agricultural wage. It is recommended that the government should invest in the human capital of both agriculture and industrial sectors to overcome the problem of unequal functional income distribution in Pakistan.

Does expanding higher education reduce income inequality in emerging economy? Evidence from Pakistan

This study investigates the impact of development in the higher education sector, on the Income Inequality in Pakistan, by using the annual time series data from 1973 to 2012. The autoregressive distributed lag bound testing co-integration approach confirms the existence of long-run relationship between higher education and income inequality. Results indicate that higher education has a negative and significant relationship with the income inequality in the long run, while a negative but insignificant effect is found in the short run. Results of cumulative sum (CUSUM) and CUSUM of square test suggest that there is no structural instability in the residuals of equation of income inequality. Results of causality analyses confirm the unidirectional causal relationship between higher education development and income inequality in Pakistan, which runs from the higher education development to the income inequality. The findings of this study suggest that development in the higher education sector would be a significant policy option to control the income inequality and should be considered a means to improve the income distribution in Pakistan.

Human development, public expenditure and economic growth: a system dynamics approach

PurposeIt is now widely recognized that human development (HD) and economic growth (EG) are intertwined in two‐way feedback processes either leading to an upward spiral of development or a poverty trap. This concept is used to overcome one of the limitations of a previous study by Qureshi which assumes exogenous gross domestic product (GDP). With endogenous GDP formulation, the impact of public expenditure on HD and EG in Pakistan is examined.Design/methodology/approachSystem dynamics approach is used to model, identify and help manage the development path of HD and EG in Pakistan given alternative policies for public expenditure on HD and EG. For this purpose the model endogenously determines path of population cohorts, and education, health and economic indicators.FindingsThe simulation results suggest that the current level of public expenditure on HD is extremely low and any further decrease will have irreversible negative impact on HD and economic indicators, even if the resources so saved are effectively invested in EG. Further, higher public expenditure on EG may neither result into better HD indicators nor economic indicators. On the contrary, higher public expenditure on HD not only improves HD indicators but also supplements EG. The results of this study conform to the results of earlier research and challenge the very basis of fiscal policy in Pakistan which has continually ignored HD over decades.Research limitations/implicationsThe model boundary excludes possible causal links of public expenditure, HD and income distribution. Identification and inclusion of these causalities may improve understanding of perpetuating asymmetric income distribution in Pakistan its role in HD and EG trade‐off.Practical implicationsThis paper suggests reorientation of fiscal policy in Pakistan and to anchor it to HD by allocating more public funds.Originality/valueThe unique characteristic of this model is explicit modelling of population cohorts in a two‐way feedback relationship with economic development considering the delays and non‐linearities involved in this process.

Economic Growth and Development in South Asia, with and without Regional Cooperation (The Jawaid Azfar Memorial Lecture)

I thank the PSDE for inviting me to deliver this plenary lecture at its 20th AGM belatedly honouring the memory of a personal friend and colleague, Jawaid Azfar, who passed away more than twenty years ago. Jawaid’s premature demise robbed Pakistan of one of its most promising economists and planners and created a vacuum in the intellectual leadership of Pakistan’s once proud economic planning and management team, which is still a gaping hole. Jawaid Azfar received his academic training in economics at Cambridge and Harvard Universities and his doctorate dissertation on income distribution in Pakistan was a seminal piece of work which inspired many other studies focusing on aspects of equity which were ignored by the earlier planners in Pakistan.1 My own two studies on poverty in Pakistan published in the 1970s benefited greatly from the methodology and insights of his study.2 While teaching at the Quaid-i-Azam University, I worked as a Consultant to the Planning Commission on macroeconomic model building, in close collaboration and almost daily interaction with him. Jawaid also agreed to my request to help in teaching courses at the University and acted as an external examiner on many occasions. Jawaid was a quiet, shy person whose low-key manner concealed his considerable intellectual depth. He died tragically at a young age of stroke due to extreme pressure of work imposed on him by his many demanding bosses who relied on his expertise to push their own self-serving agendas during the first half of Gen. Ziaul Haq’s 11-year military rule.

Trends in Inequality in Pakistan between 1998-99 and 2001-02

Although there has been a much debate on poverty in Pakistan in recent time, the discussion on inequality remained limited. Poverty and inequality are closely linked—for a given mean income, the more unequal the income distribution, the larger the percentage of the population living in income poverty. Thus, incomes at the top and in the middle of the distribution may be just as important to us in perceiving and measuring poverty as those at the bottom. It is, thus, important to monitor the whole income distribution rather than merely the bottom of distribution. The issue of income inequality in Pakistan has been important in the policy discussions since the early 1960s. Since then, a number of attempts have been made to estimate the income or expenditure inequality using the Household Income and Expenditure Survey (HIES) data. However, a perception of increasing absolute poverty in Pakistan has shifted the focus of studies from inequality (or relative poverty) to absolute poverty. Consequently, a number of attempts have been made by various authors/institutions to estimate the poverty in Pakistan in the 1990s. The debate on trends in poverty during the 1990s—an era of stabilisation and structural adjustment has been wide-ranging in Pakistan. However, there is no discussion on the changes in income distribution from the policy and institutional reforms. World Bank (2003); FBS (2001) and Kemal (2003) are only three exceptions. While the former two studies report Gini Coefficients in their studies on absolute poverty in Pakistan without explaining its variations over time, the latter study is a comprehensive review on the income distribution in Pakistan.

The Impact of Tariff Reforms on Income Distribution in Pakistan: A CGE-based Analysis

Like most developing countries, Pakistan has undertaken drastic economic policy reforms since the mid-1980s. Under these structural reforms there is a general shift away from quantitative restrictions and price controls towards liberalisation and privatisation. The empirical studies1 analysing the impact of the reforms report mixed results. Economy wide framework like Computable General Equilibrium (CGE), based on the social accounting matrix, is well suited to analysing the effect of these structural reforms. The CGE models are developed to capture the medium to long-run effects through which adjustment programmes affect income distribution. These models are often used to evaluate the effects of trade and tax policies on income distribution in developing countries. There are three interacting channels through which these adjustment policies affect income distribution, viz., the relative price effect, the asset price effect and the shift in portfolio. However, in this study, we are analysing the effect of changes in relative prices only.

Impact of Fiscal Adjustment on Income Distribution in Pakistan

This study provides a quantitative assessment of selected fiscal adjustment policies on income distribution in Pakistan. Using a latest social accounting matrix for the year 1989-90 and the static fixed-price model, various simulation exercises have been performed. The results show that reduction in subsidies has more adverse impact •on the incomes of the richest rural and urban households, implying that the richest people In the country are the greater beneficiaries of subsidies provided by the government. The evidence also suggests that a contraction in government current spending appears to have a negative impact on the incomes of all urban and rural household groups but the largest reduction appears in the income of the richest rural, followed by the poorest urban. The simulation results indicate that a decline in public expenditure on education and health affects the poorest urban and poorest rural more than the relatively better-off urban and rural income groups. Further, the estimates of Gini-coefficients show that reduction in consumption subsidies improves income distribution in both rural and urban areas of Pakistan. Conversely, reduction in subsidies on production worsens income distribution both in urban and rural areas, while reducing overall government current expenditure leads to deterioration of income distribution in urban areas but improves it in rural areas marginally. Similarly, reduction in government expenditure on education and health adversely affects income distribution in both urban and rural areas of Pakistan.

Differential Technology Adoption and Income Distribution in Pakistan: Implications for Research Resource Allocation

AbstractA multi‐market model of technological change in food production is used to simulate the long‐run income distributional implications of differential diffusion of currently available wheat technologies in Pakistan. The results indicate that a research agenda emphasizing technologies suited to Pakistan's favored production environments would enhance overall production without compromising inter‐group equity. It is found that when commodity prices are market determined, net consuming households are the major beneficiaries of technological change. However, in the more common situation of government intervention in markets for staple foods, net producing households are the principal beneficiaries of technological change.

Structure of Rural Income in Pakistan: Some Preliminary Estimates

The main objective of this paper is to study the rural income distribution in Pakistan by determining income accruing to farm and non-farm households from various assets held by them. Most of the existing literature on income distribution in Pakistan [3; 4; 8; 10; 12; 14; 17] focuses either on aggregate income or only on income from crops and classifies rural households by their income level. It ignores the internal structure of income as well as one of the main distinguishing features of rural households, namely their relation to land. In a developing country, however, the internal structure of income is likely to change with changes in the level of income. It is therefore important to assess the contribution of an individual factor (asset) to the overall income of a household and its impact on income inequality. Moreover in the case of Pakistan where land is becoming increasingly scarce for small farmers [7; II] it should be interesting to know how these farmers are trying to "fight back" the pressure on their land with alternative sources of income.

Long-term trends in income distribution in Pakistan

Household budget surveys taken during the 1960s in (West) Pakistan indicate improving income distribution during the period. Yet, the popular perception was that income distribution was worsening. Data on wages and earnings in various sectors are examined to see if they confirm or deny this improving trend, and to examine the trends in distribution since the last survey in 1972. In general, the wage and earnings data confirm the trend towards an improving distribution of income during the 1960s, but suggest that distribution may have worsened during the 1970s. These trends, furthermore, seem to be clearly linked to government policies which influenced the pattern of growth during both periods, as well as real wages in different sectors.

Rural Income Distribution in Pakistan in the Green Revolution Perspective

Relatively higher income disparities are regarded as the characteristic phenomenon of the less developed countries and as a rule, the income concen¬tration increases with economic growth during early stages of development [ll,p.25]. In general, the more rapid the growth during early stages, the more intense the development of income inequality. The underlying reasons for this development are two. First, the development-conscious governments of the less developed countries, in order to raise investment, allow income dis¬parities to widen. Second, the resource mobilization policies often lag behind and fail to cope with the continuing growth process and the resources tend to concentrate among resource owners. Since spectacular growth in Pakistan has been experienced under the green revolution, it was thought that the green revolution might lead to magnification of income inequalities in rural West Pakistan. Falcon [5,Pp, 698-710] remarks that the green revolution might generate unprecedented income inequalities among the rural classes. Gotsch [6, p. 28] argues that since the green revolution technologies (e.g., tractors, tubewells, seed and fertilizer) were concentrated in the hands of a few well-to-do farmers, there was a strong tendency for the income inequality to increase. Nigar Ahmad [1, pp.3-4] Rafiq Ahmad [2, pp.5-6] and Dilawar Ali Khan [9, pp.62-83] also hold that the impact of the green revolution technology has been biased in favour of the large land owners.

Trend of Real Income of the Rural Poor in East Pakistan, 1949-66

Pakistan's gross national product has been rising over time. While GNP per capita remained practically unchanged during the 1950's, it increased appreciably in the 1960's. The trend of per capita income does not, however, indicate whether and to what extent economic development had 'trickle down' effects to improve the lot of the relatively poorer sections of society. Studies of intertemporal changes in inequality of income distributions and in levels of income (consumption) could show what changes actually took place in their absolute and relative income positions. "Diminishing inequalities in the distribution of income" is one of the professed objectives of Pakistan's Third Five-Year Plan [21, p. 40]. This objective implies both an absolute and a relative improvement in the income level of the poorer sections of population. The two studies which are known to have been made on income distribution in Pakistan do not cover enough ground to indicate whether this was achieved in the past: the study by Mrs. Haq [10] is limited to personal income distribution in the high-income brackets (income tax payers) in urban areas for the period 1948/49 to 1960/61, and that by Bergan [1], although comprehensive, refers to a single year, 1963/64.