IMPACT OF POOR GOVERNANCE AND INCOME INEQUALITY ON POVERTY IN PAKISTAN

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There is widespread poverty in Pakistan and the two main reasons are poor governance and income inequality. Few studies have focused on the theoretical substantiation of impact of bad governance and income inequality on poverty, but we do not find any study carrying empirical work on the impact of bad governance on poverty in Pakistan. This study is an empirical research that attempts to find out the long run and short run impact of poor governance and inequality in wealth and income distribution on poverty in Pakistan through time series analysis from the year 1984 to 2008. Autoregressive Distributive Lag (ARDL) Approach to Co integration is applied in order to find out the short run and long run relationship between the variables. Co integration between poverty, poor governance and income inequality is found in the present study. The results of this study also confirm the positive relationship between poverty and income inequality both in short and long run. Poor governance is found to positively affect poverty in the long run, but in the short run it does not have significant impact on poverty in Pakistan. CUSUM and CUSUMQ stability tests are employed on the model and the results show there is a stable relationship between the variables indicating stability of the estimated model.

Keywords: Poverty, Poor Governance, Income Inequality, ARDL

On 17th June 2010 three men committed suicide in Rajana, Lahore, and Ghakhar Mandi because of poverty. As reported by police, Nadeem, a 28 years old man took his life in Lahore due to his failure to pay off debt of Rs. 800,000. In the next happening, Ismail a 22 year old man killed himself by consuming poisonous pills because of poverty, in Rajana tehsil. In the third incident in Gha...

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...esh”. Working Paper No 143. Research Program on: Good Governance and Poverty Alleviation by OECD Development Center.

Sumarto, S., A. Suryahadi and A. Arifianto (2004), “Governance and Poverty Reduction: Evidence from Newly Decentralized Indonesia”. A paper from SMERU Research Institute.

The News International. Retrieved on June 18, 2010, from http://beta.thenews.com.pk/TodaysPrintDetail.aspx?ID=29537&Cat=13&dt=6/18/2010

The QoG Social Policy Dataset Codebook .Retrieved from http://www.qog.pol.gu.se/data/QoG_Codebook_vJune09.pdf

Van der Hoeven, R. (2000), “Poverty and Structural Adjustment: Some Remarks on Tradeoffs between Equity and Growth”. Employment Paper 2000/4.Geneva: ILO Publications

World Bank (2002) Poverty in Pakistan: Vulnerabilities, Social Gaps, and Rural Dynamics. Washington, DC.

World Bank (2005) Pakistan Poverty Update, 2005. Washington, DC.

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