PANEL DATA ANALYSIS OF GROWTH, INEQUALITY AND POVERTY: EVIDENCE FROM SAARC COUNTRIES
Khan, Muhammad Mushtaq
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This paper empirically examines the impact of economic growth and income inequality on poverty for a panel of five selected SAARC countries1 , over the period of 1988-2009. There is no consensus on the growth, inequality and poverty (GIP) relationship in the SAARC region. Moreover, literature about the growth, inequality and poverty relationship in the SAARC region lacks the interpretation of results by taking into the account of pro-poor growth index. The study addresses the gap in the literature. The results of pooled least square method reveal that if there is one percent increase in economic growth reduces poverty by 0.05 percent. While one percent rise in income inequality decreases poverty by almost 0.78 percent. This phenomenon can be linked with the recent wave of privatizations in the developing countries. Public spending on education and foreign direct investment has shown a positive impact on poverty reduction process. Trade openness and increase in healthcare expenditure has found to be insignificant on poverty reduction. By using the fixed effect model, results reveal that poverty ratio in the five SAARC countries is apparently influenced by country specific effects.