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Does Governance Contribute to Pro-poor Growth? Evidence from Pakistan

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  • Rashida Haq

    (PIDE)

  • Uzma Zia

Abstract

Economic growth is a driving force in reducing poverty, but experience has shown that good governance and pro-poor choices are vitally important in the process of alleviating poverty. This paper explores linkages between governance and pro-poor growth in Pakistan for the period 1996 to 2005. The analysis indicates that governance indicators have low scores and rank at the lowest percentile as compared to other countries. The dimensions of pro-poor growth, which include poverty, inequality, and growth, demonstrate that the poor do not benefit proportionately from economic growth. It is found that poverty and inequality have worsened and the share in income and expenditure for the bottom 20 percent has also decreased, while inflation for this lowestincome group is high as compared to the highest-income group. It is also observed that approximately 25 percent households reported that their economic status was worse than in the previous year, 2004-05. The results of the study show that a strong link exists between governance indicators and pro-poor growth in the country. Econometric analysis shows that there is a strong relationship between good governance and reduction in poverty and inequality. It is concluded that greater voice and accountability, political stability, regulatory quality, and rule of law can control corruption and the pro-poor policies, which ultimately reduce poverty and inequality in the long run. To face the challenge of good governance, Pakistan needs to formulate, and implement effectively, its governance policies to improve the governance dimensions, taking account of both higher growth and the aim of achieving the Millennium Development Goals, which require halving poverty by 2015.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Governance Working Papers with number 22980.

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Date of creation: Jan 2009
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Handle: RePEc:eab:govern:22980

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Keywords: Governance Indicators; Pro-poor Growth; poverty; Inequality;

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References

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  1. Kaufmann, Daniel & Kraay, Aart, 2002. "Growth without governance," Policy Research Working Paper Series, The World Bank 2928, The World Bank.
  2. Kraay, Aart, 2004. "When is growth pro-poor? Cross-country evidence," Policy Research Working Paper Series, The World Bank 3225, The World Bank.
  3. Lopez, J. Humberto, 2004. "Pro-growth, pro-poor : is there a tradeoff?," Policy Research Working Paper Series, The World Bank 3378, The World Bank.
  4. Mian Tayyab Hassan, 2002. "Governance and Poverty in Pakistan," MIMAP Technical Paper Series, Pakistan Institute of Development Economics 2002:13, Pakistan Institute of Development Economics.
  5. Ravallion, Martin & Chen, Shaohua, 2003. "Measuring pro-poor growth," Economics Letters, Elsevier, Elsevier, vol. 78(1), pages 93-99, January.
  6. Chong, Alberto & Gradstein, Mark, 2004. "Inequality and Institutions," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4739, C.E.P.R. Discussion Papers.
  7. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series, The World Bank 2587, The World Bank.
  8. Resnick, Danielle & Birner, Regina, 2006. "Does good governance contribute to pro-poor growth?: a review of the evidence from cross-country studies," DSGD discussion papers, International Food Policy Research Institute (IFPRI) 30, International Food Policy Research Institute (IFPRI).
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Cited by:
  1. Siddiqui, Danish Ahmed & Ahmed, Qazi Masood, 2009. "The Causal Relationship between Institutions and Economic Growth: An Empirical Investigation for Pakistan Economy," MPRA Paper, University Library of Munich, Germany 19745, University Library of Munich, Germany.
  2. Siddiqui, Danish Ahmed & Ahmed, Qazi Masood, 2009. "Does Institutions effect growth in Pakistan? An Empirical investigation," MPRA Paper, University Library of Munich, Germany 19744, University Library of Munich, Germany.

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