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

  • Rashida Haq

    (PIDE)

  • Uzma Zia

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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File URL: http://www.eaber.org/node/22980
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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
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
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  1. Aart Kraay, 2004. "When is Growth Pro-Poor? Cross-Country Evidence," IMF Working Papers 04/47, International Monetary Fund.
  2. Chong, Alberto & Gradstein, Mark, 2004. "Inequality and Institutions," CEPR Discussion Papers 4739, C.E.P.R. Discussion Papers.
  3. Kaufmann, Daniel & Kraay, Aart, 2002. "Growth without governance," Policy Research Working Paper Series 2928, The World Bank.
  4. Mian Tayyab Hassan, 2002. "Governance and Poverty in Pakistan," MIMAP Technical Paper Series 2002:13, Pakistan Institute of Development Economics.
  5. Lopez, J. Humberto, 2004. "Pro-growth, pro-poor : is there a tradeoff?," Policy Research Working Paper Series 3378, The World Bank.
  6. Dollar, David & Kraay, Aart, 2002. " Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
  7. Ravallion, Martin & Shaohua Chen, 2001. "Measuring pro-poor growth," Policy Research Working Paper Series 2666, 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 30, International Food Policy Research Institute (IFPRI).
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