IS HUMAN CAPITAL A PANACEA FOR POVERTY AND INEQUALITY: EVIDENCE FROM PAKISTAN?

Abstract

There is a wide strand of literature covering the topic of human capital, poverty and income inequality. This study is an attempt to explore this relationship for Pakistan for the period from 1972 to 2019 by using ARDL technique for models’ estimation. The study used skill as an additional variable for human capital along with the variables of health and education and estimated the impact of human capital on poverty and income inequality separately. It is found that variable of health human capital and education has significant impact on the incidence of poverty. It means higher spending on human capital reduces poverty in Pakistan. The variable of skill is found significant and negatively associated with poverty. Higher spending on education reduces poverty and inequality. The impact of inflation has adverse impact on poverty. The impact of human capital is also seen to be significant in reducing inequality in Pakistan. The study suggests that investing in human capital is pivotal in the development and growth in Pakistan. Policies, therefore, carried out to support growth should not only take into account the level but also the distribution of education and health facilities, generalizing the access to formal education as well as at different stages to a wider section of the population