The relationship between foreign direct investment and pro-poor growth policies in Pakistan: The new interface

Khalid Zaman (), Muhammad Mushtaq Khan and Mehboob Ahmad

Economic Modelling, 2012, vol. 29, issue 4, 1220-1227

Abstract: The lack of asset accumulation may be one of the major reasons for poverty; consequently, the poor have not been able to sustain growth. Investment in the assets of the poor will play an essential role for formulating pro-poor growth policies. The aim of this study is to investigate the potential impact of FDI on the poor in Pakistan over the period 1985–2011. The regression model encompassing the impact of FDI on poverty reflects that if there is one percent increase in FDI is likely to reduce poverty by 0.47% at urban, 0.44% at rural and 0.46% at national levels respectively. The result concludes that although, there is a positive impact of FDI on poverty, this positive impact is not sufficient enough to conclude that investment is pro-poor in Pakistan, because, an intensity of income inequality is more than the FDI's poverty reduction at rural, urban and national levels. Pakistan's investment, poverty and inequality statistics were studied for the first time in terms of pro-poor growth scenario. Pro-poor investment index (PPII) and poverty equivalent investment rate (PEIR) reveal that investment is pro-poor in Pakistan from 1985–1986 to 2002–2005, however, the subsequent years from 2005 to 2011 demonstrated pro-rich investment scenario in Pakistan. If the investment still remains anti-poor in the subsequent years as reflected in the years 2005 to 2011, there is a likelihood that investment may not trickle down to the poor but instead to the non-poor in Pakistan. Thus checking vulnerability would offer wide option for the policy makers to settle the issue of the severity of poverty in the future.

Keywords: Foreign direct investment; Consumer Price Index; Poverty; Exchange rate; Pro-poor investment index; Pakistan (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:4:p:1220-1227

DOI: 10.1016/j.econmod.2012.04.020

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