The Dynamics Of Income Inequality In Pakistan: An Empirical Investigation On The Role Of Macroeconomic And Institutional Forces

Abstract

Turn down income inequality as a key component of green development, and the income inequality can have a negative impact on economic growth. The paper aims to assess the operators of income inequality in Pakistan using an Environmental Kuznets curve framework, which emphasizes the relationship between per capita income and inequality. We have explicitly examined the probability of the continuation of various income substantial states using the approach of nonlinear autoregressive distributed lags model (NARDL). Using time series data of Pakistan spanning the years 1981–2021. For inspecting the study, Gini coefficient is used as a dependent variable and income, employment, government spending and corruption are used as the independent variables. Our findings suggest that the coefficient of all independent variables have a positive relation with inequality in both long run and short run except income. In other words, the role of macroeconomic indicator like economic growth increases in Pakistan the income inequality decreases. Evidence suggested the attention of financial, and job related policies, corruption are tackled when income inequality reduced in Pakistan.