The Impact of Economic Reforms on Poverty: A Case Study of Pakistan

Abstract

Poverty alleviation has been a major concern of governments and international institutions in developing countries over the past few decades. In Pakistan, government and international organizations have implemented several economic reforms in the country to mitigate poverty and improve the living standards of the masses. Present study investigates the effects of these economic reforms on poverty reduction in Pakistan. Using time series data over the period of 1975-2019, the study constructs indices of social reforms, trade reforms and financial reforms following the methodology of Morris and McAlpin (1983). An econometric model is formulated to explore the link between poverty and economic reforms. Results of the model are obtained using ARDL technique. It is found that trade reforms significantly reduce poverty in the long run while social and financial reforms remained insignificant for poverty eradication. Other important factors determining poverty in the long run are unemployment and real output. On the basis of the findings, it is suggested that trade restrictions should be minimized and there should be focus towards increasing trade at international level. Furthermore, long term financial and social sector planning is required to increase the effectiveness of economic reforms.