A Time Series Analysis of Foreign Aid and Income Inequality in Pakistan
Pakistan economy is one of those economies that has received a huge amount of foreign aid. Foreign aid has been considered to help capital-deficient economies to fulfill the desired levels of finances to generate growth, increase employment and income, and furthermore, it helps to alleviate poverty levels in the recipient economies. Present study focuses on the analysis of impact of foreign aid on income inequality in Pakistan. Since time series data is used for the analysis so the ADF and Phillip-Perron unit root test are applied to find out each of the time series to be stationary at its first difference. Johansen contegration test and vector error correction models are employed to examine the long run and short run impacts of growth, foreign aid, foreign direct investment, and labor force participation rate on income inequality, respectively. The cointegration test results confirm negative impact of economic growth on income inequality whereas foreign aid, foreign direct investment and labor force participation rate are concluded to have inequality increasing impacts. The results are statistically significant.
|Date of creation:||31 Jul 2013|
|Publication status:||Published in Global Journal of Management and Business Research Economics and Commerce 13.5(2013): pp. 11-20|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- Mosley, Paul, 1980. "Aid, Savings and Growth Revisited," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 42(2), pages 79-95, May.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Abhijit V. Banerjee & Esther Duflo, 2000.
"Inequality and Growth: What Can the Data Say?,"
NBER Working Papers
7793, National Bureau of Economic Research, Inc.
- Collier, Paul & Dollar, David, 2002.
"Aid allocation and poverty reduction,"
European Economic Review,
Elsevier, vol. 46(8), pages 1475-1500, September.
- Engle, Robert & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-276, March.
- Arjan Verschoor & Adriaan Kalwij, 2006. "Aid, social policies and pro-poor growth," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(4), pages 519-532.
- Pallage, Stephane & Robe, Michel A, 2001.
"Foreign Aid and the Business Cycle,"
Review of International Economics,
Wiley Blackwell, vol. 9(4), pages 641-672, November.
- Michel A. Robe & Stephane Pallage, 2000. "Foreign Aid And The Business Cycle," Computing in Economics and Finance 2000 107, Society for Computational Economics.
- Stephane Pallage & Michel Robe, 1998. "Foreign Aid and the Business Cycle," Cahiers de recherche CREFE / CREFE Working Papers 63, CREFE, Université du Québec à Montréal.
- Muhammad Javid & Abdul Qayyum, 2011. "Foreign Aid and Growth Nexus in Pakistan: The Role of Macroeconomic Policies," PIDE-Working Papers 2011:72, Pakistan Institute of Development Economics.
- Robert Lensink & Oliver Morrissey, 2000. "Aid instability as a measure of uncertainty and the positive impact of aid on growth," Journal of Development Studies, Taylor & Francis Journals, vol. 36(3), pages 31-49.
- Singh, Ram D, 1985. "State Intervention, Foreign Economic Aid, Savings and Growth in LDCs: Some Recent Evidence," Kyklos, Wiley Blackwell, vol. 38(2), pages 216-232.
- Papanek, Gustav F, 1973. "Aid, Foreign Private Investment, Savings, and Growth in Less Developed Countries," Journal of Political Economy, University of Chicago Press, vol. 81(1), pages 120-130, Jan.-Feb..
- Griffin, Keith B & Enos, J L, 1970. "Foreign Assistance: Objectives and Consequences," Economic Development and Cultural Change, University of Chicago Press, vol. 18(3), pages 313-327, April.
- Persson, Torsten & Tabellini, Guido, 1994.
"Is Inequality Harmful for Growth?,"
American Economic Review,
American Economic Association, vol. 84(3), pages 600-621, June.
- Henrik Hansen & Finn Tarp, 2000.
"Aid effectiveness disputed,"
Journal of International Development,
John Wiley & Sons, Ltd., vol. 12(3), pages 375-398, 04.
- Abdulnasser Hatemi-J & Manuchehr Irandoust, 2005. "Foreign Aid And Economic Growth: New Evidence From Panel Cointegration," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 30(1), pages 71-80, June.
- Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-228, August.
- Gupta, Kanhaya L, 1975. "Foreign Capital Inflows, Dependency Burden, and Saving Rates in Developing Countries: A Simultaneous Equation Model," Kyklos, Wiley Blackwell, vol. 28(2), pages 358-374.
- Oecd, 2002. "Aid volume, channels and allocations for poverty reduction," OECD Journal on Development, OECD Publishing, vol. 3(3), pages 33-46.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- David Locke Newhouse & Prachi Mishra, 2007. "Health Aid and Infant Mortality," IMF Working Papers 07/100, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:48877. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.