Dynamics of Growth, Poverty, and Inequality in Pakistan

Salman Syed Ali, Sayyed Tahir

Abstract


The relationship between growth, inequality, and poverty has
been a moot point. On the one hand growth is considered central or the
best course to reduce poverty (e.g. World Development Report 1990) with
the preconditions that access to education, health, and social services
are available to all by means of other policies. On the other hand,
there is a realisation that growth, inequality, and poverty relations
are non-linear, complex, and path dependent in their dynamics. An
important point made in this context by Kuznets (1955) was the empirical
finding of an inverted U (arch) shape relationship between growth and
inequality which suggested that the inequality would increase with
growth in the beginning, but will decline at higher levels of growth as
the benefits of growth trickle down to lower income strata. This
argument has been debated since then in the literature with empirical
support gathered for and against this hypothesis. Recent theoretical
literature on the issue tries to find the micro-foundations of the
dynamical relations between these three variables (see for example,
proceedings of the 5th ABCDE Annual (World) Bank Conference on
Development Economics).

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DOI: https://doi.org/10.30541/v38i4IIpp.837-858

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