A pivotal aspiration of economic policy for several decades has been the reduction of poverty. An economically strong country is generally expected to be less afflicted by poverty, but this depends in turn on economic growth and a judicious distribution of income (Kakwani and Son, 2003; Kamal, 2006; Asad and Ahmed, 2011). In a broader view, economic advancement and poverty reduction can be seen through pro-poor growth, which explains how the poor are influenced by this advancement, how its benefits are delivered to the poor, and how much advantage the poor gain from them (Chenery et al., 1974; Ravallion, 2004; Karlsen, 2008; Son and Kakwani, 2008). However, Ali et al.. (2016) judged this connection between growth and poverty reduction to be insubstantial if its advantages are concentrated among a few wealthy people and simultaneously demonstrated that real economic prosperity involves reducing mass poverty by giving the poor a fair chance to benefit from it.
Why Growth Alone Cannot Explain Poverty Reduction
In order to examine the utility of growth performance in lessening poverty, one of the key factors is the study of the trilateral association between growth, poverty, and inequality (Kakwani, 1997; Bourguignon, 2004). Some studies claim to have examined this relationship and discovered a strong link among particular variables (Heshmati, 2004; Iradian, 2005; Anwar, 2010). Nevertheless, studies by Ali and Tahir (1999), Aman et al.. (2009), and Zaman et al.. (2012) claimed that this association between growth, poverty, and inequality is intricate, and the empirical outcomes of their investigations strongly suggested that economic growth alone is a weak criterion for assessing poverty reduction. Moreover, the study by Zaman and Ahmed (2008) claimed that although economic growth is essential for poverty reduction, it must not be considered the sole standard.
Inequality and the Kuznets Hypothesis
It can be concluded from this discussion that although inequality, poverty, and economic growth are strongly linked with each other, this association is complicated, nonlinear, and path-dependent. According to Kuznets’s (1955) inverted-U hypothesis, the association between economic growth and inequality suggests that in the early stages of economic growth, inequality worsens and then steadily improves as the benefits of growth trickle down to poor income groups. Later on, Alesina and Roderic (1994) and Knowles (2001) favored Kuznets’s study, while Kaldor (1956), Li and Zou (1998) and Forbes (2000) rejected it and suggested inequality basically stems from economic growth. Various studies, such as Ravallion and Chen (1997) and Dollar and Kray (2002), found no correspondence between growth and inequality and were therefore inconclusive about Kuznets’s inverted-U hypothesis.
Poverty Equivalent Growth Rate
After Bourguignon’s (2004) explanation of the trilateral relationship among growth, poverty, and inequality, Kakwani and Son (2008) also discussed this phenomenon through the notion of pro-poor growth. Their study evaluates the degree to which the poor gain an advantage from economic growth. They also established a new indicator for evaluating the growth rate, called the poverty equivalent growth rate (PEGR). This index not only indicates the degree to which the poor benefit from growth but also reflects its multiple benefits. The calculation of the index shows that the larger the value of PEGR, the greater the reduction in poverty.
Definitions and Patterns of Pro Poor Growth
A stream of literature portrays a broader view of the poverty reduction capacity of economic growth. Primarily, Ravallion and Chen (2003) explained that pro-poor growth is growth that plays an effective role in reducing poverty. Dollar and Kraay (2002), in their paper “Growth is good for the poor,” stated that positive economic growth is not only advantageous for the economy but is also beneficial for the poor in a similar fashion. Similarly, a study by Kakwani and Pernia (2000) explained that growth is pro-poor if poor stakeholders in the economy enjoy comparatively more benefits of growth than their richer counterparts. They also stated that, in a negative-growth context, growth is considered pro-poor if the poor are comparatively less harmed than non-poor members of society. Furthermore, the study by Ravallion and Chen (1997) explained the role growth plays with reference to the poor through the growth elasticity of poverty. They stated in mathematical terms that if the growth elasticity of poverty is 3, it simply means that a 1 percent increase in economic growth (income or consumption) reduces poverty by 3 percent. Similarly, Foster and Szekely (2000) showed that the positive growth elasticity of poverty is advantageous for the poor. Similar views are also shared by Ames et al.. (2000), Anderson (2001), and Christiaensen et al.. (2002). Furthermore, pro-poor growth is elaborated further by categorizing it into relative and absolute terms. The relative concept states that growth is pro-poor if it decreases poverty and improves relative inequality. Nevertheless, if viewed in absolute terms, pro-poor growth is considered to be one in which the poor get more or equal absolute benefits of growth than the non-poor. Under the current description, growth is also mentioned as ‘super poor’ if, during the advancement of economic growth, absolute inequality declines (Mc Culluch et al., 2000; Kakwani and Pernia, 2000; Son, 2003). Kakwani and Son (2003) further extended the above idea by showing what role negative growth plays in pro-poorness. They specified that although negative growth is usually associated with a rise in poverty, it sometimes reduces poverty when the effect of lessening inequality compensates for the corresponding influence of negative growth on poverty. Such growth is referred to as ‘strongly pro-poor.’ In contrast, Bhagwati (1988) explained the notion of “immiserising” growth, which holds that positive growth can also increase poverty. Such a situation takes place only when the poverty equivalent growth rate is negative or an excessive rise in inequality counterbalances the advantageous effect of growth. Still, another arrangement defines growth as ‘anti-poor’ if negative growth results in a rise in poverty while improving inequality. Similarly, the final situation is described as ‘strongly anti-poor’ if poverty and inequality rise together because of negative growth. To assess the broader picture of this discussion, we can present this trilateral relation among growth, poverty and inequality in the form of a diagram, which is as follows.
1.2 Background of Pro-poor Growth and Triangular Relationship among Growth, Poverty, and Inequality: A Detailed View in Pakistan Scenario
In Pakistan, growth, poverty, and inequality have exhibited fluctuating trends from independence to the current decade. A wider assessment of this situation is presented in the following sections.
1.2.1 Historical Trend of Poverty in Pakistan Since the Last Five Decades
Pakistan has experienced varying poverty trends ever since independence. Some studies are of the view that, in the early 1960s, poverty in Pakistan was continually on the rise in both urban and rural areas. Some might disagree because it was a period of rapid growth in the agriculture sector. Poverty did increase because the benefits of growth did not trickle down to lower income groups as its boons were accumulated in a few rich hands (Kamal (2001); Arif and Ahmad (2001)). In a similar study, Naseem (1977) suggested a more comprehensive view of this poor trickle-down effect of growth and concluded that, despite high growth, 82 percent of people in rural areas lived below the standard of 2,100 calories per adult per day. However, poverty decreased at the national and sub-national levels in the next few decades because of a tremendous increase in the growth rate, private investment in the agriculture sector, and the inflow of money from the Middle East (Omer and Jaffri, 2008; Malik, 1994 and Ali and Tahir, 1999). Still, these efforts to uproot poverty ultimately came to nothing, and once again poverty rose, pushing 12 million people into poverty from 1993 to 1999, with the majority of those affected living in rural areas.
Although the leading causes of this sharp rise in poverty were attributed to a decline in economic growth, lower development spending, rising corruption, poor governance, and several droughts (ADB, 2002; Anwar, 2006; Gop, 2009-10), poverty nevertheless fell from 34.40 to 12.4 between 2001 and 2010, and a great number (17.948) of poor individuals succeeded in coming out of poverty. This occurred mainly in rural areas because a number of steps were taken there, such as the Benazir Income Support Program, better support prices for agricultural goods, an increase in the inflow of remittances, and improvement in income disparities (Zaman and Khilji, 2013; Gop, 2013-14). In summary, reducing income disparities plays a key role in reducing poverty at both the national and regional levels in Pakistan.
1.2.2 Historical Trend of Income Inequality in Pakistan Since the Last Five Decades
Along with poverty, the last five decades also saw a phenomenal variation in the status of inequality in Pakistan. In the early sixties, researchers witnessed a rapid decline in inequality. Many factors accounted for it, including better growth, the green revolution and the divisibility of technology in the agriculture sector in rural areas (Anwar, 2005; Choudhary, 1982; Zakir and Idrees, 2009). Still, this fall in inequality lasted only for a very brief period, and in the next couple of decades, despite historic growth and an increasing influx of money, there was a sharp increase in inequality. Kemal (2006) gave an explanation for this unexpected rise in inequality. The reason he gave was that increased growth and an increased inflow of money resulted in higher employment and real wages in both the agriculture and manufacturing sectors, leading to higher inflation, which ultimately increased income disparities at the national and regional (urban and rural) levels. Nevertheless, despite multifarious problems such as poor growth performance, poor governance, and several droughts, the next decade revealed a declining trend of inequality until 1998. In the last couple of years of the century, inequality again rose because of structural adjustment and stabilization programs (which are acknowledged to cause an increase in inequality) (Mehmood, 2001). In the final decade, researchers witnessed a sharp decline in inequality at the national as well as regional (urban and rural) levels because of a more aggressive growth strategy and appropriate trickle-down of benefits toward the poor income quartile (Anwar, 2006; Gop, 2011).
1.2.3 Growth Trend and Pro-Poorness of Growth in the Last Five Decades
Having thoroughly discussed poverty and inequality, we turn to various studies that explain different patterns of growth and their influence on the poor in previous decades. It is unanimously agreed that there was a significant increase in growth during the 1960s. It was chiefly because of the green revolution in the agriculture sector. However, this growth failed to reduce poverty (which rose instead) due to the poor trickle-down of growth benefits to lower-income groups. Such a rise in growth, nevertheless, did cause declines in inequality, which made this growth pro-poor at the national level and anti-poor at the regional level (Omer and Jafri, 2008; Zaman and Khilji, 2013). In the next couple of decades, growth was so strong that these decades are called the golden age of Pakistan’s economy. This growth was accompanied by appropriate trickle-down, which resulted in pro-poor growth at both the national and regional levels. Contrary to this, the period of the 1990s was handicapped by a number of shocks (corruption, political instability, and many droughts), due to which there was a considerable decline in economic growth, which severely affected the poor residing in rural areas. Since the poor were more severely affected by this situation, growth is regarded as anti-poor. However, in the last decade, although the rise in growth was smaller than in the previous period, the poor benefited from it due to the government’s more aggressive strategy compared with the 1990s. Therefore, the current period is regarded as pro-poor for Pakistan’s economy at the national as well as regional levels (Omer and Jafri, 2008; Zaman et al.., 2012; Cheema and Sial, 2012; Jamal, 2014; Zaman et al.., 2014; Ali et al.., 2016). To obtain a clearer picture of this discussion, the triangular relationship and pattern of growth can be represented in the following table:
Table 1.1 Growth, Poverty and Inequity Triangle Along with Pro-Poor Growth
| 1961-1970 | 1971-1980 | 1981-1990 | 1991-2000 | 2001-2010 | |
| Growth Trend | Increasing | Increasing | Increasing | Declining | Increasing |
| Poverty Trend | Increasing | Declining | Declining | Increasing | Declining |
| Inequality Trend | Declining | Increasing | Increasing | Declining | Increasing |
| Pro-Poor Growth | Beneficial for Poor | Beneficial for Poor | Beneficial for Poor | Against Poor | Beneficial for Poor |
Source: Self-made using data from Kemal, 2006; Omar and Jafri, 2008; Zaman and Khilji, 2013; and Ali et al.., 2016
1.3 Previous Views about Pro-Poorness at the National and Regional Levels in Pakistan
As far as Pakistan is concerned, various researchers have explored the triangular linkages among growth, poverty, and inequality, employing different approaches and using different data sets. Saboor and Zakir (2005) used the HIES data set to measure poverty equivalent growth at the national, regional, and provincial levels in Pakistan from 1991 to 2001. Their results showed that in the 1990s, only Baluchistan experienced pro-poor growth, while growth remained anti-poor in the other provinces (Punjab, Sindh, and KPK) and in rural and urban regions. Omer and Jafri (2008) explained pro-poor growth for Pakistan in the last four decades, from 1968-69 to 2004-05. The estimated outcomes of their study confirmed that, except in the 1990s, growth remained pro-poor for Pakistan at the national level in the other three decades (1970s, 1980s, and 2000s). Similarly, Anwar (2010) measured the relative role of growth and inequality in reducing poverty from 1998-99 to 2004-05 by using poverty decomposition and the Growth Incidence Curve method. The results of the study sufficiently showed that growth plays a vital role in reducing absolute poverty. The study of Cheema and Sial (2010) also evaluated poverty decomposition from 1992-93 to 2005-06 by using Ravallion (1992) and Kakwani (1997) decomposition approaches. The results of their study showed that while poverty dropped in Pakistan, it did so only in urban areas due to substantial growth, while it rose in rural areas because the inequality factor there overwhelmed the effect of growth. Again, Cheema and Sial (2012) studied pro-poor growth in Pakistan by using HIES data from 1993 to 2008 and applying two different approaches: Poverty Equivalent Growth Rate (PEGR) and Poverty Bias of Growth (PBG). The estimated outcomes of their study revealed that growth remained pro-poor during the periods 1994 to 1997 and 2006 to 2008, while remaining anti-poor from 1997 to 1999, 2002 to 2005, and 2005 to 2006. Ali et al.. (2015) measured pro-poor growth in different agro-climatic zones of Pakistan by using the HIES data set from 1998-99 to 2010-11. They followed the agro-climatic zone’s division of Pinkey (1989). The estimated results of their study indicate that, except for the Mixed and Rains Punjab zones, the relative pattern of growth remained pro-poor in the other seven agro-climatic zones due to the relative reduction in inequality and positive growth. However, apart from a couple of zones (Rice/Other Sindh and Baluchistan), the absolute pattern of growth remained anti-poor in the remaining seven zones.
The main aim of the current study is to explore growth, poverty, and inequality trends in two major agro-climatic zones of Punjab, an area left unexplored by Ali et al.. (2015), whose study covered the period from 1998 to 2011. Therefore, the current study makes a special effort to bridge this gap by exploring the dynamic trends of growth, poverty, and inequality in two major agro-climatic zones of Punjab from 1998-99 to 2015-16, focusing on the 2012, 2014, and 2016 HIES data sets.
Objectives
The study aims to explore the growth, poverty and inequality dynamics in rural Punjab with the following precise objectives:
- To evaluate numerous poverty measures for two major agro-climatic zones of Punjab
- To scrutinize the distribution pattern of growth benefits in both relative and absolute terms between poor and non-poor across two major agro-climatic zones in Punjab; and
- To formulate a precise policy matrix for lessening poverty in two major agro-climatic zones
Academic Master Education Team is a group of academic editors and subject specialists responsible for producing structured, research-backed essays across multiple disciplines. Each article is developed following Academic Master’s Editorial Policy and supported by credible academic references. The team ensures clarity, citation accuracy, and adherence to ethical academic writing standards
Content reviewed under Academic Master Editorial Policy.
