Trends in Inequality in Pakistan between 1998-99 and 2001-02
Author(s)
Anwar, Talat
Abstract
There have been various attempts to estimate absolute poverty during the 1990s but there is hardly any attempt to examine the issue of income inequality in Pakistan. The paper examines the trends in inequality from the most recent micro datasets of Pakistan Integrated Household Surveys (PIHS), 1998-99 and 2001-02. The results suggest that inequality has worsened in Pakistan between 1998-99 and 2001-02. While inequality declined in urban areas, inequality increased in rural areas over the period. Although urban inequality declined, the poorest 40 percent income groups in urban areas lost their income share, implying that decline was at the expense of the poor. While inequality declined in Punjab, NWFP, and Balochistan across urban areas, inequality increased significantly in urban Sindh. On the other hand, inequality declined in rural areas in Sindh, NWFP, and Balochistan but increased in rural Punjab over the period. The result suggests that decline in economic growth seems to have resulted in losses of income amongst the poorest groups and thus increased income inequality in Pakistan during the period. While a number of studies have already shown a rising trends in absolute poverty, inequality seems to have worsened also throughout the 1990s. The results suggest that income inequality is higher in 2001-02 than in the previous years of the 1990s. A strand of research shows that high inequality entails a lower subsequent rate of growth in average income and hence a lower rate of progress in reducing absolute poverty. Thus, if government aims to reduce absolute poverty via its growth-accelerating strategy, it should focus fundamentally on reducing high-income inequalities through its redistributive policies of taxes and transfers.
