Pathways to Alleviate Poverty in Pakistan: The Role of FDI Inflows, Human Capital and Income Inequality

Abstract

The fundamental purpose of economic development is to increase the population's socioeconomic well-being. Economic well-being is strongly dependent on equal national income distribution, and poverty reduction. Similarly, Pakistan has been a surge in interest in fair income distribution and poverty alleviation during the last three decades. The main aim of the study to investigate the effect of FDI inflows, human capital and income inequality on poverty reduction in Pakistan and used the data period from 1980-2020 and ARDL technique for estimation. This research found that the Gini coefficient and inflation rate (Inf) have positive and significant effect on poverty, while the government expenditure, gross domestic product per capita (GDPpc), foreign direct investment (FDI), and secondary school enrollment (SSE) have also adverse effect on PV in the long run (LR). Similarly, this study also found that the income inequality and inflation rate have positive and noteworthy effect on poverty, while the government expenditure, GDPpc, FDI, and SSE have also adverse and noteworthy effect on PV in the short run (SR). The ECT value is negative and substantial; this means that there are sixty-one percent speeds of adjustment from SR to LR equilibrium. Therefore, this study concluded that equal income distribution, FDI inflows and human capital can significantly reduce in the poverty in Pakistan. This study recommended that to diminish the poverty, the government should undertake growth-oriented policies as well as tactics aimed at improving income distribution.