An Empirical Analysis of Globalization-Poverty Nexus: Evidence from Pakistan

Abstract

Despite the significant progress that has been observed towards the Millennium goals, more than one billion people still live on less than 1.25 US dollars per day. A large body of the literature has focused on the growth effects of globalization and generally documents favourable effects of globalizing on economic growth. Does globalization reduce poverty? This question has received relatively less attention and the available evidence is not conclusive. This study investigates the impact of globalization on poverty in Pakistan using annual time series data from 1975 to 2018. The empirical analysis for the effect of globalization on poverty is based on the ARDL approach to cointegration. The empirical findings show that globalization exerts a significant adverse influence on the annual poverty of Pakistan. It implies that the ongoing process of globalization is leaving the poor of Pakistan behind. Globalization accentuates not ameliorates poverty and thus marginalizes the poor of Pakistan.

On the Nonlinear Effects of Globalization on Poverty: Insights from African Countries

“…The outcome also confirms the findings of Deyshappria (2018) for developing countries, Khan and Majeed (2018) for 113 developing countries, and Hassan, Bukhari, and Arshed (2019). To add to this, the finding validates the study of Salahuddin et al (2019) for South Africa and Majeed and Farooq (2021) in Pakistan. All these authors confirm that globalization plays a pivotal role in poverty reduction in developing countries including Africa.…”

“…The study also reports that political globalization results in a low level of poverty in Indonesia and Turkey, while its impact on the poverty level is insignificant in Mexico. In Pakistan, Majeed and Farooq (2021) establish that there is a negative relationship between globalization and annual poverty in the said country. This implies that as the level of globalization increases, annual poverty in Pakistan reduces.…”

“…In an empirical way, several earlier studies have shown that the effect of globalization on poverty is mixed. While some studies (Agenor, 2004; Bergh & Nilsson, 2011, 2014; Goff & Singh, 2014; Gohou & Soumare, 2012; Majeed & Farooq, 2021; Ogbuaku, Adebisi, & Feridun, 2006; Oyewale & Amusat, 2013; Salahuddin, Vink, Ralph, & Gow, 2019; Salimono, 1999; Ucal, 2014) argue that the poor would benefit from the process of globalization, others (Agenor, 2004; Kanbur, 2014; Ogbuaku et al, 2006; Okungbowa & Eburayolo, 2014; Stark, 2004) believe that globalization process would increase the level of poverty.…”

“…According to Koengkan, Fuinhas, and Santiago (2019), the process of globalization could have both negative and positive impacts on the economies. For instance, Osinubi (2020), Lee (2014), and Kutor (2014) have shown that globalization helps in reducing poverty, while studies such as Majeed and Farooq (2021), Osinubi (2020), Deyshappria (2018), Kanbur (2014), Okungbowa and Eburajolo (2014), and Singh and Huang (2011) document that globalization has done more harm than good in alleviating poverty. To add to this, Chishti, Ullah, Ozturk, and Usman (2020) report that the asymmetric effects of variables seem more practical, as the behavior of people (variables) cannot be predicted with certainty.…”

Can Piketty’s Interest Rate – Growth Rate Framework Explain Increasing Income Inequality in Pakistan?

“…In Pakistan different studies have also taken place to see this relation and it is seen that trade openness effect income inequality and increases poverty as the distribution from it is not evenly distributed (Khan and Bashir, 2012). Empirically it has been seen that trade may assist the upper class and on the other hand creates harm for the poor one (Majeed, 2010). Inflation being purely monetary phenomena affects income inequality of a country.…”