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 Ghakhar Mandi, 25 years old Muhammad Riaz was unsuccessful in making both ends meet so he took toxic substance and expired. Two other people Muhammad Ameer and Abdul Khaliq in Wan Bhachhran village ended their lives due to poverty. These news of suicidal attempts indicate that incidence of poverty is on increasing trend in Pakistan. Increasing poverty in Pakistan is alarming. Even though the middle-class has increased to 30 million in Pakistan, nearly one-quarter of the population is categorized poor as of October 2006. As of 2008, 17.2% of the total population subsisted below the poverty line, which is the lowest figure in the history of Pakistan. Thirty three percent of people of Pakistan lived below the human poverty index line in 2009. The downward trend in poverty through the decades of 1970s and 80s was reversed in the 1990s by poor policies, materialism, ungoverned and widespread corruption, which were in turn bred by unequal distribution of income and wealth, regressive tax policies and monopoly over assets.
In their article Bukhari and Haq (2008) reported according to the research study carried out by the Centre for Research on Poverty and Income Distribution (CRPID), that sixty three percent of total poor in...