Pakistan’s poverty puzzle: role of foreign aid, democracy & media

Abstract

In theory, poverty reduction is associated with economic growth and equal access to opportunities for all citizens, regardless of their age, gender and income. Pakistan has reduced its poverty headcount by nearly 66% between 2002–2016, despite poor governance, weak institutions, mediocre economic growth, and poor social indicators. Using ADL/VAR and Granger causality tests, the paper empirically proves that change in political regimes, openness of media and foreign aid have contributed to alleviation of poverty in the country. The paper finds that the shift towards a stable democratic regime has facilitated the delivery of social services, regardless of the motive. Furthermore, it finds that free flow of information through the media has created an awareness among the masses about their rights; the access to information has led to a more equitable distribution of social services. Foreign aid has also contributed to alleviating poverty by focusing on targeted programs towards different groups with the help of various international organizations. These finding have important implications for interactions between the developed and underdeveloped economies as well as the economic and social benefits of democratic regimes.