Multiple Inequalities and Policies to Mitigate Inequality Traps in Pakistan | Economic Inequality | Gini Coefficient

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The growth–inequality nexus has long been debated by researchers, social commentators and politicians. Despite being controversial, there is growing evidence of multi-dimensional inequality in developing countries, including Pakistan. Oxfam has carried out research on multiple inequalities in Pakistan in collaboration with the Lahore University of Management Sciences (LUMS), the findings of which are presented in this report. The research focused on multi-dimensional inequality in Pakistan to highlight the nature and dimensions of inequality
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  OXFAM RESEARCH REPORT MARCH 2015 This research report was written to share research results, to contribute to public debate and to invite feedback on development and humanitarian policy and practice. It does not necessarily reflect the policy positions of the organizations jointly publishing it. The views expressed are those of the author and not necessarily those of the individual organizations. MULTIPLE INEQUALITIES AND POLICIES TO MITIGATE INEQUALITY TRAPS IN PAKISTAN   ABID A. BURKI Professor of Economics RASHID MEMON  Assistant Professor   KHALID MIR  Assistant Professor    Department of Economics Mushtaq Ahmad Gurmani School of Humanities and Social Sciences (MGSHSS) Lahore University of Management Sciences (LUMS) Sector U, DHA, Lahore Cantt., Lahore, Pakistan  2 TABLE OF CONTENTS ACKNOWLEDGEMENTS  .......................................................................................................... 5 ABBREVIATIONS  ..................................................................................................................... 6 EXECUTIVE SUMMARY  ........................................................................................................... 7 1 INTRODUCTION  ...............................................................................................................15 2 NATURE AND DIMENSIONS OF INEQUALITY: WHERE DO WE STAND?  ....................16 2.1 Introduction .................................................................................................................16 2.2 Inequalities of income and consumption .....................................................................16 2.3 Income polarization .....................................................................................................20 2.4 Measuring inequality by asset score ...........................................................................23 2.5 Unequal opportunities in educational attainment .........................................................25 2.6 Investment in human capital infrastructure and poverty alleviation ..............................27 2.7 Spatial inequality in road infrastructure .......................................................................27 2.8 Inequality and taxation ................................................................................................29 2.9 Inflation tax and inequality ...........................................................................................32 3. IDENTIFYING INEQUALITY TRAPS  ....................................................................................35 3.1 Introduction .................................................................................................................35 3.2 Inequality traps in Pakistan .........................................................................................36 3.3 Gender and education ................................................................................................44 4. MITIGATING MULTI-DIMENSIONAL INEQUALITY  .............................................................48 4.1 Introduction .................................................................................................................48 4.2 Market failures and inequality .....................................................................................49 4.3 The persistence of inequality ......................................................................................52 4.4 Elite capture and inequality .........................................................................................55 5. POLICY IMPLICATIONS  ......................................................................................................58 REFERENCES  .........................................................................................................................60  3 TABLES Table 2.1: Changes in Gini coefficient inequality in Pakistan ......................................................... 18   Table 2.2: Gini coefficient and Wolfson polarization index, by province (Gini/polarization index 100) .. 20   Table 3.1: International estimates of inter-generational elasticity .................................................. 37   Table 3.2: Occupation transition matrix (father and son) ............................................................... 43   Table 3.3: Index of association for selected occupations ............................................................... 44    4 FIGURES Figure 2.1: Changes in Gini coefficient in Pakistan, urban vs. rural areas ..................................... 19   Figure 2.2: Changes in Gini inequality, by province ....................................................................... 21   Figure 2.3: Changes in income polarization in Pakistan, urban vs. rural areas .............................. 22   Figure 2.4: Changes in income polarization, by province .............................................................. 22   Figure 2.5. Ranking of Punjab districts by asset score, 2007  – 08 and 2010  – 11 ............................. 24   Figure 2.6: Mapping of Punjab tehsils  by asset index .................................................................... 25   Figure 2.7: Inequality in road density in Punjab, 2005  – 06 ............................................................. 28   Figure 2.8: Direct and indirect tax revenues, 1990  – 2013 .............................................................. 29   Figure 2.9: Sectoral contributions to indirect taxes ........................................................................ 30   Figure 2.10: Sectoral contributions to direct taxes ......................................................................... 31   Figure 2.11: Exemptions from indirect taxes (Rs. Billion) .............................................................. 31   Figure 2.12: Inflation tax and inequality (OECD countries 1966  – 90) ............................................. 33   Figure 2.13: Food inflation rate, broad money growth and government borrowing, 1991  – 2008 in Pakistan .................................................................................................................................... 34   Figure 3.1: Inter-generational earnings elasticity in Pakistan (father   – son), 1991  – 2011 ................. 36   Figure 3.2: Income quintiles of sons born to bottom- and top-quintile fathers, 2010  – 11 ................ 37 Figure 3.3: Earnings quintiles of sons born to bottom- and top-quintile fathers, 1994  – 95 .............. 38   Figure 3.4: Earnings quintiles over time ........................................................................................ 39   Figure 3.5: Mean years of education by quintile and year ............................................................. 40   Figure 3.6: Male/Female Employment in agriculture ..................................................................... 46
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