Impact of poor governance and income inequality of poverty in Pakistan

Abstract

The widespread poverty is due to two main reasons are poor governance and income inequality in Pakistan. 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 for the year 1984-2008. 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 run 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.