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Background of Pro-poor Growth and Triangular relationship Among Growth, Poverty, and Inequality: A General View

A pivoted aspiration of the economic policy since some decades has been lessening of poverty. An economically strong countries is supposed to be one least afflicted by poverty, but in turn is dependent upon growth of economy and a judicious apportionment of income (Kakwani and Son, 2003; Kamal, 2006 and Asad and Ahmed, 2011). In a broader views economic advancement and poverty reduction can been seen through pro-poor growth which explains how poor are influenced by this advancement, how its boons are delivered to the poor and how much vantage poor gain from them (Chenery et al.,1974:Ravallion,2004: Karlsen,2008 and Son and Kakwani,2008). However, Ali et al. (2016) judged this connection between growth and poverty reduction to be unsubstantial if its advantages are accumulated among a few wealthy people and demonstrated simultaneously that real economic prosperity is the reduction of mass poverty by giving poor a fair chance to be benefitted from it.

In order to examine the utility of growth performance in lessening poverty, one of the key factor is the study of trilateral association between growth poverty and inequality (kawaii, 1997 and Bourguignon, 2004). Some studies claim to have examined this relation and discovered strong link among particular variables (Heshmati, 2004; Iradian, 2005 and Anwar, 2010). Nevertheless, Ali and Tahir (1999); Zaman et al. (2009) and Zaman et al. (2012) studies claimed that this association between growth poverty and inequality is intricate one and experimental outcomes of their investigations forcefully suggested that economic growth alone is a feeble criteria for checking poverty reduction. Moreover, study of Zaman and Ahmed (2008) claimed that though economic growth is inevitable for poverty reduction, it must not be considered be a sole standard.

It can be summed up from this discussion that tough inequality, poverty and economic growth are strongly linked with each other; this association is complicated, nonlinear and path dependent. According to Kuznets (1955) inverted U hypothesis, an association between economic growth and inequality demonstrated that at early stages of economic growth inequality deteriorates and then steadily better when benefits of growth trickle down to poor income groups. Later on, Alesina and Roderic (1994) and Knowles (2001) favor Kuznets’s study while Kaldor (1956), Li and Zou (1998) and Forbes (2000) rejected it and suggested inequality basically stems from economic growth. While various studies like Ravallion and Chen (1997) and Dollar and Kray (2002) found no correspondence between growth and inequality, therefore being indecisive about Kuznets’s inverted U Hypothesis.

After Bourguignon (2004) explanation of the trilateral relation among growth, poverty and inequality, Kakwani and Son (2008) also discuss this phenomenon through the notion of pro-poor growth. His study evaluates the degree to which poor gain advantage from economic growth. They also establish a new demonstrator for the evaluation of growth rate christened as poverty equivalent growth rate (PEGR). Particular index not only tells the degree to which poor benefit from growth but also its multifarious boons. In the meantime, calculation of index shows that larger the value of PEGER greater will be the reduction of poverty.

A stream of literature portrays a broader view of poverty reduction capacity of economic growth. Primarily, Ravallion and Chen (2003) elaborated a pro-poor growth is the one which play an effective role in declining poverty. Dollar and Kraay (2002) in his paper “Growth is good for the poor” pronounced that positive economic growth is not only advantageous for the economy; it is also beneficial for the poor in a similar fashion. Similarly study of Kakwani and Pernia (2000) emphatically explained that growth is pro-poor if poor stake holder of economy comparatively enjoy more boons of growth than their rich fellow whereas they also stated that in a negative reference, growth is taken as pro-poor if poor are comparatively less harmed than non-poor member of society. Furthermore, study of Ravallion and Chen (1997) explained the role growth plays with reference to poor through growth elasticity of poverty. They stated in mathematically term that if growth elasticity of poverty is 3, it simply means that 1 percent increase in economic growth (income or consumption) decline poverty by 3 percent. Similarly Foster and Szekely (2000) illuminated that positive growth elasticity of poverty is advantageous for poor. Precise views are also shared by Ames et al. (2000): Anderson (2001) and Christiaensen et al. (2002). Furthermore, pro-poor growth is elaborated more tactfully by categorizing into the relative and absolute term. The relative concept divulges that growth is pro-poor if its decreases poverty and better relative inequality. Nevertheless, if viewed in absolute terms, a pro-poor growth is consider to be one in which poor gets more or equal absolute benefits of growth than non-poor. Under 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 and Son, 2003). Kakwani and Son (2003) further stretched the above idea by showing what role a negative growth plays in pro-poorness. They specified that though negative growth is usually associated with an up rise of poverty, it sometimes reduces poverty in a scenario when effect of lessening inequality compensates the corresponding influence of negative growth on poverty. Such a growth is referred to as ‘strongly pro-poor. In contrast, Bhagwati (1988) enlightened the notion of “immiserising” growth which stated that there is also possibility that positive growth increase poverty such situation only took place when poverty equivalent growth rate is negative or too much rise in inequality counterbalance the advantageous effect of growth. Still, another arrangement defines growth as ‘anti poor’ if negative growth results in an up rises of poverty while improving inequality. Similarly, final situation is described as ‘strongly anti-poor’ if poverty and inequality rise together because of negative growth. For assessing 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.

Figure 1.1 Growth, Poverty and Inequality Triangle and Pro-poor Growth Structure

Source: Adopted from Zaman and Khilji, 2013

1.2 Background of Pro-poor Growth and Triangular Relationship among Growth, Poverty, and Inequality: A Detailed View in Pakistan Scenario

In the background of Pakistan since the day of independence to this decade’s growth, poverty and inequality have exhibited fluctuating trend. A wider assessment of this situation is described under the following lines.

1.2.1 Historical Trend of Poverty in Pakistan since Last Five Decades

Pakistan economy has been varying in its trend of poverty ever since the day of independence. Some studies of the view that, in the early decade of the 1960s, poverty in Pakistan was continually on rise in both urban and rural areas. Some might disagree because it was the period of rapid growth in agriculture sector. But poverty did increase because the benefits of growth were not trickle down to lower income groups as its boons were accumulated in few rich hands (Kamal (2001); Arif and Ahmad (2001)). In a similar context study of Naseem (1977) suggested a more comprehensive view point of this poor trickle-down effect of growth and summarized that in spite the high growth still 82 percent people of rural areas live below the standard 2100 calories per adult per day. However, the curse of poverty was on decrease at national and sub-national level in the next few decades because of a tremendous increase in a growth rate, private investment in agriculture sector and transmission of money from Middle East (Omer and Jaffri, 2008; Malik, 1994 and Ali and Tahir, 1999).Still, these efforts to uproot poverty ultimately come to nothing and once again, this phenomenon rose which turned 12 million people into poverty since 1993 to 1999 with majority of victims living in rural areas.

While leading causes of this horrible up rise in poverty are attributed to be a decline in economic growth, lower development spending, rising corruption, poor governance, and country experienced several droughts (ADB, 2002; Anwar, 2006 and Gop 2009-10). Nevertheless, in the period of 2000s poverty fallen from 34.40 to 12.4 since 2001 to 2010 and a great number (17.948) of poor individuals succeeded to come out of poverty. It was mainly so in rural areas and because of the fact that a number of step were taken over there such as Benazir Income Support Program, better support prices to agriculture goods, increase in the inflow of remittances and improvement in income disparities (Zaman and Khilji, 2013and Gop, 2013-14). It can be summarized as a result of this discussion that reduction of income disparities plays a key role in declining poverty both at national and regional level in Pakistan.

1.2.2 Historical Trend of Income Inequality in Pakistan since Last Five Decades

Along with poverty, last five decades also saw a phenomenal variation in the status of inequality for Pakistan. In the early sixties, researcher witnessed a rapid decline of inequality. Many factor accounted for it including better growth, green revolution and divisibility of technology in the agriculture sector in rural areas (Anwar, 2005; Choudhary, 1982 and Zakir and Idrees, 2009). Still, this fall in inequality was but for a very brief period and in next couple of decades in spite of historic growth and increase influx of money there was a Sharpe increase in inequality. Kemal (2006) gave explanation for this unexpected rise in inequality. The reason he gave was that increased growth and up rise of influx of money resultantly cause increase in employment and real wages in both agriculture and manufacturing sector leading to an increase in rate of inflation which ultimately leads to increase in income disparities at national and regional (urban and rural) level. Nevertheless, despite of multifarious problems like poor growth performance, poor governance, and several droughts, next decade revealed the declining trend of inequality till 1998. In the last couple of years of the century, inequality again rose because of structural adjustment and stabilization program (which are acknowledged to cause increase in inequality) (Mehmood, 2001). In case of the final decade, researcher witnessed sharp decline in inequality at national as well as regional (urban and rural) level because of more aggressive growth strategy and appropriate trickle-down of benefits toward poor income quartile. (Anwar, 2006 and Gop, 2011).

1.2.3 Growth Trend and Pro-Poorness of Growth in Last Five Decades

Having thoroughly discussed poverty and inequality, we come to varied studies which explained different situations of growth and its influence on poor in the previous decades. It is unanimously agreed that there was a significant increase of growth in initial decade of sixties. It was chiefly because of the green revolution in the agriculture sector. However, this growth failed to decline poverty (which rose on contrary) due to poor trickledown of growth benefits to the lower income groups. Such rise in growth, nevertheless, did cause declines in inequality which made this growth pro-poor at the national level and anti-poor for the regional level (Omer and Jafri, 200 and Zaman and Khilji, 2013). In the next couple of decades, there was such a supreme growth that these decades are called golden age for Pakistan economy. This growth was accompanied by appropriate trickle down which resulted in pro-poor situation of growth at national as well as regional level. Contrary to it, 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 the economy growth which severely affected the poor residing in the rural areas. Since poor were the one more victimized by this situation, growth is regarded as anti-poor. However, in last decades, although rise in growth is smaller than the previous period, yet poor are benefitted from it due to aggressive straight of government as compared to 1990s. Therefore current period is regarded as pro-poor for Pakistan economy at national as well as regional level (Omer and Jafri, 2008; Zaman et al., 2012; Cheema and Sial, 2012; Jamal, 2014; Zaman et al., 2014; Ali et al., 2016). In order to view a more clear picture of this discussion triangular relation and pattern of growth can be represented in the form of well-established table that is as follow:

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


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 National and Regional Level 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) took aid of HIES data set to measure poverty equivalent growth at a national, regional and provincial level in Pakistan from 1991 to 2001. Results of their studies concluded that in the epoch of the 90s only Baluchistan saw pro-poor growth; while it remained anti-poor for other provinces (Punjab, Sindh, and KPK) and rural, urban region. Omer and Jafri (2008) explained pro-poor growth for Pakistan in last four decades from 1968-69 to 2004-05. Estimated outcomes of their study confirmed that except 1990s growth remains pro-poor for Pakistan at the national level in other three decades (1970s. 1980s and 2000s). Likewise, pervious discussion Anwar (2010) measured the relative role of growth and inequality toward the decline in poverty for the period of 1998-99 to 2004-05 by using poverty decomposition and Growth incidence curve method. Results of their study sufficiently proved that growth play vital role for lessening absolute poverty. 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. Results of their study summarized that while poverty dropped in Pakistan it did so only in urban area due to substantial growth, while it rose in the rural areas, as the inequality factor there overwhelmed effect of growth. Again Chemma and Sial (2012) studied pro-poor growth in case of Pakistan by using HIES data from 1993 to 2008 and taking aid of two different approaches; Poverty Equivalent Growth Rata (PEGR) and Poverty Bias of Growth (PBG). Estimated outcomes of their study revealed that growth remains pro-poor from the period 1994 to 1997 and 2006 to 2008 while remains anti-poor from 1997 to 1999, 2002-2005 and 2005 to 2006. Ali et al. (2015) measured pro-poor growth in different agro-climatic zones of Pakistan by using HIES data set from 1998-99 to 2010-11. They followed agro-climatic zone’s division of Pinkey (1989). Estimated results of their study signify that except for the Mixed and Rains feed Punjab zones; in rest of the seven agro-climatic zones, relative pattern of growth remained pro-poor due to the relative lessening in inequality and positive growth. However, keep aside a couple of zones (Rice/Other Sindh and Baluchistan) and the absolute pattern of growth remains anti-pro poor in remaining seven zones.

The main aim of the current study is to explore growth, poverty and inequality trend in two major agro-climatic zones of Punjab; which is an area left unexplored after Ali et al.(2015) study (which did this explanation from 1998 to 2011). Therefore current study makes special effort to bridge up such gap by exploring the dynamic trend of growth, poverty, and inequality in two major agro-climatic zones of Punjab from 1998-99 to 2015-16 by focusing on 2012, 2014 and 2016 HIES data sets.


The study is aims to explore the growth, poverty and inequality dynamics in rural Punjab with the following precise objectives:

  • To evaluate numerous poverty measure 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



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