Dissertation Shams - Glasgow Theses Service - University of Glasgow

173 Pages·2012·1.03 MB·English

by  Khadija Shams

Shams, Khadija (2012) Income inequalities and well-being in rural
Pakistan.

PhD thesis

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Income Inequalities and
Well-being in Rural Pakistan
Khadija Shams
submitted in fulfilment of the requirements for the degree of
Doctor of Philosophy
College of Social Sciences
Business School
Economics
University of Glasgow
January 2012
Thesis Advisers: Dr. Luis Angeles
Dr. Alexander Kovalenkov
Examination Committee: Professor Richard Harris
Dr. Sai Ding
Dr. Philippe LeMay-Boucher
In the honour and memory of my father Malik Shams-ul-Haq Khattak
Abstract
Income inequalities and subjective well-being have been increasingly
identified in the literature as important measures of socio-economic cohe-
sion. This is particularly relevant for developing economies that are typi-
cally characterised by strong population growth and relatively low incomes
per head. Although in those economies a considerable share of resources is
derived from rural areas, data availability for these regions is often an issue
which precludes important insights into the overall socio-economic tissue
of the developing world. This dissertation seeks to advance our knowledge
on various aspects of inequalities and well-being with particular emphasis
on rural Pakistan. At the core of the present monograph lie three chapters
that deal with income inequality, subjective well-being as well as physical
well-being (i.e. health). The empirical analysis is based on a unique survey
dataset that covers the four provinces of rural Pakistan. The dissertation
seeks to contribute to the existing literature in several dimensions. We
decompose overall income inequality by its different types to disentangle
which sources of income are inequality-increasing and which ones reduce
socio-economic divergence. The empirical measurement and assessment of
both subjective and physical well-being in rural Pakistan is a rather novel
aspect. We introduce and examine different well-being measures as indica-
tors of (subjective) poverty and find that well-being in rural areas is largely
driven by financial factors. When it comes to health, however, overall re-
sults are less clear-cut. The thesis is therefore able to offer several policy
recommendations for important socio-economic factors in rural Pakistan.
On a more general note, some of the results discussed might also illuminate
the policy debate in other geographic areas with similar characteristics.
Contents
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . viii
Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x
List of Tables xi
1 Introduction and Motivation 13
2 Country context and research design 18
2.1 Country context . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.1.1 Geographic and macroeconomic background . . . . . 18
2.1.2 Cultural and socio-economic background . . . . . . . 19
2.1.2.1 Religion . . . . . . . . . . . . . . . . . . . . 19
2.1.2.2 Family setup . . . . . . . . . . . . . . . . . 20
2.1.2.3 Social stratification . . . . . . . . . . . . . . 20
2.1.2.4 Typical lifestyle in a Pakistani village . . . . 20
2.1.2.5 Healthcare . . . . . . . . . . . . . . . . . . 21
2.1.2.6 Land Tenure and Property . . . . . . . . . . 22
2.1.3 Commercial activities and taxation . . . . . . . . . . 22
2.1.3.1 Trade and labour . . . . . . . . . . . . . . . 22
2.1.3.2 Types of taxes in Pakistan . . . . . . . . . . 22
2.1.3.3 Tax evasion in Pakistan . . . . . . . . . . . 24
2.1.3.4 Social transfers . . . . . . . . . . . . . . . . 24
2.2 Research design . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.2.1 Data and sampling procedure . . . . . . . . . . . . . 25
3 Income inequality in rural Pakistan – sources and decom-
positions 29
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.2 Related literature . . . . . . . . . . . . . . . . . . . . . . . . 31
v
CONTENTS vi
3.3 Income sources . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.3.1 Overall income shares . . . . . . . . . . . . . . . . . 33
3.3.2 Distribution of sample households by income quintiles 34
3.3.3 Income shares by district . . . . . . . . . . . . . . . . 35
3.4 Inequality decomposition by income sources . . . . . . . . . 36
3.4.1 Decomposing overall income inequality . . . . . . . . 36
3.4.2 Decomposition of overall income inequality by province 39
3.4.3 Decomposition of overall income inequality by district 40
3.5 Inequality decomposition by regions . . . . . . . . . . . . . . 43
3.5.1 Decomposition of income inequality within and be-
tween provinces . . . . . . . . . . . . . . . . . . . . . 43
3.5.2 Decomposition of income inequality within and be-
tween districts . . . . . . . . . . . . . . . . . . . . . . 44
3.6 Partial correlation analysis . . . . . . . . . . . . . . . . . . . 45
3.7 Conclusion and Policy implications . . . . . . . . . . . . . . 47
4 Well-being and poverty in rural Pakistan: a subjective
approach 49
4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.2 Some stylised facts and basic concepts . . . . . . . . . . . . 52
4.3 Descriptive statistics . . . . . . . . . . . . . . . . . . . . . . 54
4.4 Determinants of overall satisfaction . . . . . . . . . . . . . . 57
4.4.1 The model . . . . . . . . . . . . . . . . . . . . . . . . 57
4.4.2 Baseline results . . . . . . . . . . . . . . . . . . . . . 61
4.4.3 Children and household’s specific characteristics . . . 71
4.5 Alternative measures . . . . . . . . . . . . . . . . . . . . . . 76
4.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
5 Socio-economic determinants of health in rural Pakistan:
relative or absolute standards? 89
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
5.2 Inequalities in health and the healthcare system . . . . . . . 94
5.3 Data and methodology . . . . . . . . . . . . . . . . . . . . . 95
5.3.1 Descriptive statistics . . . . . . . . . . . . . . . . . . 96
5.3.2 Empirical specification . . . . . . . . . . . . . . . . . 99
5.4 Empirical results . . . . . . . . . . . . . . . . . . . . . . . . 100
5.4.1 OLS estimation . . . . . . . . . . . . . . . . . . . . . 100
5.4.1.1 Absolute and Relative Income Hypotheses:
separate and joint tests . . . . . . . . . . . 100
CONTENTS vii
5.4.2 Robustness tests . . . . . . . . . . . . . . . . . . . . 107
5.4.2.1 Ordered probit modelling . . . . . . . . . . 108
5.4.2.2 Poisson regression modelling . . . . . . . . . 111
5.5 Concluding remarks . . . . . . . . . . . . . . . . . . . . . . . 113
6 General conclusions and directions for future research 115
A Appendix Chapter 2 120
B Sample Questionnaire 122
C Appendix Chapter 4 125
D Appendix Chapter 5 150
Bibliography 166
Acknowledgements
A common joke in my home country suggests that PhD stands for Perma-
nent head Damage. I am not sure I can agree entirely. It goes without
saying that such a long-term endeavour brings many challenges and, yes,
at times sufferings. But I feel very blessed and thankful to have met so
many helpful people along the way. It would be impossible to mention all
of them explicitly. With all their support, I truly feel my studies have not
caused me any (mental) damage at all but have rather been a Pleasant and
highly-rewarding Discovery.
First and foremost, I am extremely thankful to my supervisors, Dr. Luis
Angeles and Dr. Alexander Kovalenkov, for their valuable suggestions and
continuous support in all aspects of my research. I am deeply indebted to
Luis for his advice and guidance. I also would like to thank Alexander for
his support in setting up the study and his excellent comments on the first
draft of this dissertation.
My work has moreover benefited from fruitful discussions with other
colleagues as well as constructive comments made by several participants at
various workshops and research seminars. A special word of thanks to my
liebling and officemate Alexander for being, above all, a dear friend.
Working on a research project of this nature is an iterative process that
requires several stages of revision. I am therefore truly grateful for the
suggestions and remarks made by my examiners. I believe their comments
have improved my work. I am particularly pleased about the superb advice
by Professor Richard Harris. Richard has introduced me to interesting
techniques that allowed me to strengthen the analysis.
I would like to express my gratitude to the Department of Economics
for providing me with the necessary software and for offering a pleasant
research environment. I highly appreciate the training courses and research
eventsorganisedbytheScottishInstituteforResearchinEconomics(SIRE),
the Scottish Graduate Programme in Economics (SGPE) and the Applied
Quantitative Methods Network (AQMeN). I am particularly thankful for
thepersonalinsightsofferedbyProfessorBillGreeneandProfessorElhanan
Helpman on various econometric methods for the empirical data analysis.
The biggest word of appreciation has to go to the members of the house-
holds participating in the survey across the four districts of rural Pakistan.
Without their assistance and cooperation, this study would not have been
possible.
I am pleased to acknowledge financial support by the Higher Education
viii
Commission (HEC) in Pakistan and am grateful to the Frontier Women
University, Peshawar, for giving me the opportunity to study abroad. Last
but not least, I would like to thank my mum and my family for their under-
standing, patience and moral support, which has enabled me to complete
my studies.
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