IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Remittances, Trade Liberalisation, and Poverty in Pakistan : The Role of Excluded Variables in Poverty Change Analysis

Author Info

Listed author(s):
  • Rizwana Siddiqui

    (PIDE)

  • A. R. Kemal

Abstract

This study attempts to assess the impact of two shocks - trade liberalisation and a decline in remittances from abroad- on poverty in Pakistan using a CGE framework. It is found that tariff reduction in the absence of a decline in remittances reduces poverty, as measured by the head count, poverty gap, and severity ratios (FGT indicators) in both the rural and urban areas of Pakistan. In terms of welfare, all households appear to gain. The results show that the gain in welfare is larger for urban households than for rural households. We conclude from this that trade liberalisation reduces the gap between urban and rural households. In a second set of experiments, it was found that trade liberalisation in the presence of a decline in remittances reduces welfare in urban households but rural household still show an increase over the base year. According to all FGT indicators, poverty increases in urban households but not in rural households. The combined stock is more harmful to households in the urban areas than in the rural areas. However, this welfare gain and poverty reduction in the presence of trade liberalisation only. Aggregate statistics show that the negative impact of remittance decline dominates the positive impact of trade liberalisation in urban areas. On the other hand, in the case of rural areas, the positive impact of trade liberalisation dominates the negative impact of decline in remittances. It shows that the decline in remittance inflows is a major contributory factor in explaining the increase in poverty in Pakistan.This study attempts to assess the impact of two shocks - trade liberalisation and a decline in remittances from abroad- on poverty in Pakistan using a CGE framework. It is found that tariff reduction in the absence of a decline in remittances reduces poverty, as measured by the head count, poverty gap, and severity ratios (FGT indicators) in both the rural and urban areas of Pakistan. In terms of welfare, all households appear to gain. The results show that the gain in welfare is larger for urban households than for rural households. In addition, poverty reduces by a larger percentage in urban households than in rural households. We conclude from this that trade liberalisation reduces the gap between urban and rural households. In a second set of experiments, it was found that trade liberalisation in the presence of a decline in remittances reduces welfare in urban households but rural household still show an increase over the base year. According to all FGT indicators, poverty increases in urban households but not in rural households. The combined stock is more harmful to households in the urban areas than in the rural areas. However, this welfare gain and poverty reduction in the presence of trade liberalisation only. Aggregate statistics show that the negative impact of remittance decline dominates the positive impact of trade liberalisation in urban areas. On the other hand, in the case of rural areas, the positive impact of trade liberalisation dominates the negative impact of decline in remittances. It shows that the decline in remittance inflows is a major contributory factor in explaining the increase in poverty in Pakistan.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.eaber.org/node/22224
Download Restriction: no

Paper provided by East Asian Bureau of Economic Research in its series Development Economics Working Papers with number 22224.

as
in new window

Length:
Date of creation: Jan 2006
Handle: RePEc:eab:develo:22224
Contact details of provider: Postal:
JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200

Web page: http://www.eaber.org

More information through EDIRC

Keywords: Trade Liberalisation; remittance; poverty; households;

Other versions of this item:

Find related papers by JEL classification:
  • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy
  • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
  • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. John Cockburn, 2002. "Trade Liberalisation and Poverty in Nepal: A Computable General Equilibrium Micro Simulation Analysis," CSAE Working Paper Series 2002-11, Centre for the Study of African Economies, University of Oxford.
  2. Rizwana Siddiqui & Zafar Iqbal, 1999. "Social Accounting Matrix of Pakistan for 1989-90," PIDE-Working Papers 1999:171, Pakistan Institute of Development Economics.
  3. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
  4. A. R. Kemal, 1981. "Substitution Elasticities in the Large- Scale Manufacturing Industries of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 20(1), pages 1-36.
  5. Mohammad, Irfan, 1999. "Emigration from Pakistan - 1947-97," MPRA Paper 38623, University Library of Munich, Germany.
  6. Decaluwe, B. & Patry, A. & Savard, L. & Thorbecke, E., 1999. "Poverty Analysis Within a General Equilibrium Framework," Cahiers de recherche 9909, Université Laval - Département d'économique.
  7. Sohail J. Malik & Mohammad Mushtaq & Hina Nazli, 1989. "An Analysis of Production Relations in the Large-scale Textile Manufacturing Sector of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 28(1), pages 27-42.
  8. Siddiqui, Rizwana & Kemal, A R, 2006. "Poverty-reducing or Poverty-inducing? A CGE-based Analysis of Foreign Capital Inflows in Pakistan," MPRA Paper 2283, University Library of Munich, Germany.
  9. Clarete, Ramon L. & Whalley, John, 1988. "Interactions between trade policies and domestic distortions in a small open developing country," Journal of International Economics, Elsevier, vol. 24(3-4), pages 345-358, May.
  10. Rehana Siddiqui & Rizwana Siddiqui & Zafar Iqbal, 1999. "The Impact of Tariff Reforms on Income Distribution in Pakistan: A CGE-based Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 38(4), pages 789-804.
  11. Hans De Kruijk, 1987. "Sources of Income Inequality in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 26(4), pages 659-672.
  12. Rashid Amjad & A.R. Kemal, 1997. "Macroeconomic Policies and their Impact on Poverty Alleviation in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(1), pages 39-68.
Full references (including those not matched with items on IDEAS)

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as
in new window


Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:eab:develo:22224. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shiro Armstrong)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.