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The relationship between foreign direct investment and pro-poor growth policies in Pakistan: The new interface

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  • Zaman, Khalid
  • Khan, Muhammad Mushtaq
  • Ahmad, Mehboob

Abstract

The lack of asset accumulation may be one of the major reasons for poverty; consequently, the poor have not been able to sustain growth. Investment in the assets of the poor will play an essential role for formulating pro-poor growth policies. The aim of this study is to investigate the potential impact of FDI on the poor in Pakistan over the period 1985–2011. The regression model encompassing the impact of FDI on poverty reflects that if there is one percent increase in FDI is likely to reduce poverty by 0.47% at urban, 0.44% at rural and 0.46% at national levels respectively. The result concludes that although, there is a positive impact of FDI on poverty, this positive impact is not sufficient enough to conclude that investment is pro-poor in Pakistan, because, an intensity of income inequality is more than the FDI's poverty reduction at rural, urban and national levels. Pakistan's investment, poverty and inequality statistics were studied for the first time in terms of pro-poor growth scenario. Pro-poor investment index (PPII) and poverty equivalent investment rate (PEIR) reveal that investment is pro-poor in Pakistan from 1985–1986 to 2002–2005, however, the subsequent years from 2005 to 2011 demonstrated pro-rich investment scenario in Pakistan. If the investment still remains anti-poor in the subsequent years as reflected in the years 2005 to 2011, there is a likelihood that investment may not trickle down to the poor but instead to the non-poor in Pakistan. Thus checking vulnerability would offer wide option for the policy makers to settle the issue of the severity of poverty in the future.

Suggested Citation

  • Zaman, Khalid & Khan, Muhammad Mushtaq & Ahmad, Mehboob, 2012. "The relationship between foreign direct investment and pro-poor growth policies in Pakistan: The new interface," Economic Modelling, Elsevier, vol. 29(4), pages 1220-1227.
  • Handle: RePEc:eee:ecmode:v:29:y:2012:i:4:p:1220-1227
    DOI: 10.1016/j.econmod.2012.04.020
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    References listed on IDEAS

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    Cited by:

    1. Magombeyi, Mercy Tsitsi & Odhiambo, Nicholas Mbaya, 2017. "Dynamic impact of FDI inflows on poverty reduction:Empirical evidence from South Africa," Working Papers 22006, University of South Africa, Department of Economics.
    2. Muhammad Khan & Muhammad Khan & Khalid Zaman & Umar Hassan & Sobia Umar, 2014. "Global estimates of growth–inequality–poverty (GIP) triangle: evidence from World Bank’s classification countries," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(5), pages 2631-2646, September.
    3. Zaman, Khalid & Khilji, Bashir Ahmad, 2013. "The relationship between growth–inequality–poverty triangle and pro-poor growth policies in Pakistan: The twin disappointments," Economic Modelling, Elsevier, vol. 30(C), pages 375-393.
    4. Nazeem ud din & Khalid Zaman & Shagufta Ashraf & Faiza Sajjad & Sundas Saleem & Uzma Raja, 2015. "Quality versus quantity in health care and educational reforms: combating poverty," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(1), pages 267-293, January.
    5. Xu, Xu & Sylwester, Kevin, 2016. "The effects of foreign direct investment on emigration: The roles of FDI source country, education, and gender," Economic Modelling, Elsevier, vol. 55(C), pages 401-409.
    6. Zaman, Khalid & Khilji, Bashir Ahmad, 2013. "The relationship between growth and poverty in forecasting framework: Pakistan's future in the year 2035," Economic Modelling, Elsevier, vol. 30(C), pages 468-491.
    7. Khalid Zaman & Bashir Khilji, 2014. "A note on pro-poor social expenditures," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(4), pages 2121-2154, July.
    8. repec:spd:journl:v:67:y:2017:i:2:p:101-116 is not listed on IDEAS
    9. Babajide Fowowe & Mohammed Shuaibu, 2014. "Is foreign direct investment good for the poor? New evidence from African countries," Economic Change and Restructuring, Springer, vol. 47(4), pages 321-339, November.
    10. Magombeyi, Mercy T & Odhiambo, Nicholas M, 2017. "Does foreign investment reduce poverty? Empirical evidence from Tanzania," Working Papers 22562, University of South Africa, Department of Economics.

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    Keywords

    Foreign direct investment; Consumer Price Index; Poverty; Exchange rate; Pro-poor investment index; Pakistan;

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