DISTRIBUTIONAL IMPACT OF FOREIGN REMITTANCES IN PAKISTAN

Mansoor Mushtaq, Muhammad Azmat Hayat, Shabbir Ahmad, Muhammad Nadeem


DOI: http://dx.doi.org/10.22555/pbr.v19i2.1449

Abstract


This paper studies the impact of foreign remittances on income
distribution for Pakistan by collecting time series data from 1980 to
2010. The dependent variable is income inequality and the
independent variables are foreign remittances, trade openness,
economic growth and the inflation rate. The data on worker
remittances was taken in different forms such as current U.S. dollars
and total remittance receipt as a percentage of GDP. The empirical
analysis was done by using Johansen’s cointegration test and vector
error correction model (VECM). The results indicate that in both of
the models, a long-run relationship was present among the variables
and short- run analysis showed convergence towards long-run
equilibrium. Remittances had a significant and positive impact on
income inequality in both the cases. Similarly, trade openness had a
significant and positive impact on income inequality, leading to
worsening of income distribution. However, economic growth and
inflation improved income distribution.


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