Impact of Education and Health on Poverty in Pakistan A

Critical Study

Sabeen Khurram Khan*, Mohamed Nasr** and
Natasha Hamidani***


INTRODUCTION

Poverty, headcounts and also known as income gap is when the proportion of populations
income falls below a specified poverty-line. The income required bringing the poor class
beyond the poverty level, and comprehending the income disparity amongst the poor is
termed as the FGT Index. Regardless of the measure through which poverty is gauged;
the poverty-line, consumption levels vital to meet the food and other fundamental needs
of the general community play an important role in the poverty estimation. (Amjad and
A. R. Kemal 1997).
Poverty is a multi-dimensional concept among others things it includes lack of access to
sufficient health services and sanitation, a high degree of illiteracy, insufficient income,
and scarcity of basic rights and security. This multi faceted concept of human
deprivation interacts in many significant ways; e.g. good health leads to higher
productivity and improves the performance and results in increased incomes.
In Pakistan, significant research have been carried out that measures poverty. In these
studies incidence of poverty has been measured for one, two or at the most for three
different survey years. These surveys used different definitions and methodologies that
yielded results which were not strictly comparable.
Analysis of poverty provides insight of the nature and extent of poverty, not just as
measure of consumption, but also as a human development index. Raise in human
development contributes positively to educational attainment and health improvement.
Eventually this investment in human capital will also help alleviate poverty. Collectively,
the educational attainment and health of population is, therefore, vital to the countrys
ability to lessen poverty level and develop economically. Policy-makers and economist
are always interested to understand and evaluate the linkages of poverty alleviation,
education and health.

____________________________

*Sabeen Khurram Khan, COMSATS Institute of Information Technology, Park Road, Chak
Shahzad Islamabad, Pakistan. skhan@comsats.edu.pk
**Dr. Mohamed Nasr, COMSATS Institute of Information Technology, Park Road, Chak
Shahzad Islamabad, Pakistan
***Natasha Hamidani, COMSATS Institute of Information Technology, Park Road, Chak
Shahzad Islamabad, Pakistan. Natasha_hamidani@comsats.edu.pk


SIGNIFICANCE

The study aims to identify the relationship between two factors of human resources on
poverty alleviation. It will be of considerable importance: for the improvement of the
poor regions of the country, but will also provide invaluable insight in to this important
matter for the government. It will also help to identify the weak areas of socio-economic
setup. Moreover, this research will suggest certain strategies and techniques on practical
basis. With the help of those strategies, poverty can be reduced and the factors which
amplify poverty could also be relegated. Furthermore, this research will cast light upon
need to develop its relation to the reduction of poverty with reference to the
improvements in the quality of Education and Health. Thus, this research will be an
authentic fact file to alleviate poverty and to improve the quality of life.

More specifically the purpose of the study is:
- To find out whether poverty is decreasing in Pakistan
- To determine the nature and strength of relationship of Education and Health with
poverty alleviation.
- To find out the extent of reduction in poverty due to improvement in Education
and Health.
- To analyze techniques and remedies to reduce poverty.

PROBLEM STATEMENT:
This study is entitled as:
Do Education and Health Help Alleviate Poverty? With Reference to Pakistan
The focus of the study will be to investigate the relation and dependency between
Education, Health and poverty alleviation (with special reference to Pakistan).

LITERATURE REVIEW

Improvement in human resources and increase in investment by human capital
contributes to poverty reduction (Li Wei 1994). Angell and Graham found that there is a
significant link between poverty alleviation and social sector reforms (SSR). Further,
they also cited that long-term investments in human capital and short-term safety net
measures are given more attention now than in the past. A study done by Shenggen Fan,
peter hazel, and Sukhaded Thorats (2000) showed that government expenditure on
education and health results in poverty reduction in rural India. Gupta and Mitra (2004)
study assessed the likely link among poverty, health and economic growth; by using
panel data for Indian States. They concluded despite the fact that economic growth
reduces poverty but health improvement is also essential for poverty alleviation.
Explanatory variable such as literacy and industrialization contributed to growth, better
health conditions and poverty reduction.
The major proposition is that better health results in increased economic growth, at the
same time economic growth causes in improved health status of people. For high living
standards and accelerated economic growth increased investment in growth promoting
areas like industry, education and health is required. Human development is critical in
nurturing growth. Growth and human development reciprocate and strengthen each other:
human development promotes growth, and growth promotes human development. A
program that is effective and promotes growth and human development creates a
"virtuous circle" of swift progress in poverty reduction. Hence, efficient strategies for
human development are imperative factor of the growth strategy. By adopting a pro-poor
growth strategy and promoting human development, poverty can be reduced (Kemal
2000). Of the many characteristics of the poor, the major are: lack of education and skills,
large family size, and other human resources. According to O. S. Verma, the only asset of
the poor is human capital, and in reducing poverty, its development is of fundamental
importance. Protection of poor against health hazards and risks, building marketable
skills and eradication of destructive practices like child labor, play a pivotal role in
human capital development. In order to increase the productivity and contribution by the
society, the relevance, quantity and quality of social services need to be ensured. Studies
conducted by Human Resource Development in Asia and the Pacific in the 21
st
Century
show that primary schooling improves the productivity of small farmers. Evidence from
13 low income countries shows, that 4 years of schooling is accompanied by some 8%
increase in farm output. It is important to mention that there were complementary
investments in better roads, access to marketing facilities, fertilizers and improved crop
varieties facilitating to increase the productivity. This all lead to the fact that the positive
impact of 4 years of primary schooling is higher. There is positive correlation between
government spending on education and productivity of people. According to human
capitals conventional theory developed by Becker (1962) and Mincer (1974) education
and training are the major sources of human capital accrual that, in turn, have direct and
positive effect on individuals life time earnings. Streeten (1983) noted that
improvements in the nutrition, health and skills of people result in the development of the
human resources and poverty alleviation. ECO-UNDP is assigned the task to intensify
poverty reduction efforts through human resources development in compliance with the
UN Millennium Development Goals. Special programs at national and regional levels are
planned to accelerate development of areas lagging behind in economic growth and
appropriate income redistribution policies. (ECO-UNDP)

THEORETICAL FRAMEWORK
This research will be conducted to investigate the relation and dependency between
different factors of human resources (Education and Health) development ultimately
resulting in poverty reduction. The main indicators of human resources being considered
as explanatory variables are Education and Health. The dependent/response variable in
the model is the poverty status of individuals which will be categorized into two
categories: poor and non- poor. All explanatory variables and response variable in the
model are qualitative. Since the response variable is dichotomous, a binomial logistic
regression model will be set-up.

One of the most significant factors to lessen the poverty rate within the country is
education. The better the education of the people within the country, higher will be their
earning rate. Education facilitates a society in accumulation of technical, managerial and
entrepreneurial skills that are needed to overcome natural, environmental and physical,
and resource constraints for development; consequently it increases output and boosts
living standards (Farooq & Ofosu, 1992). The better is the education that people attain,
the higher will be their productivity, and will enable them to earn more income.

The World Health Organization (WHO) defines health: as a state of complete physical,
mental, and social well-beingnot merely the absence of disease or infirmity. One of
the principal non-income characteristic of poverty is Low health status. The poor are
most vulnerable to sickness and face untimely death caused due to dietary reasons.
Furthermore, their children tend to have less birth weight and usually are unable to have
approach to medical care. Hence poor people suffer more from ill health as compared to
the poor. According to the one of the reports by World Health Organization, the poorest
20% of the global population are 14 times more likely to die in childhood than the richest
20% of the worlds population. Likewise, more Indian women die through pregnancy in
a week as compared to European women in a year (DFID, 2000). For poor people illness
is cause of suffering and pain which for them is key characteristic of being poor. For
them, illness is probable largest cost they bear when a sole household bread winner is not
able to earn his or her income. So, good health is an important element in reducing
poverty.
Better healthcare, besides good education, is anticipated to improve work output of
existing and prospective generations. Presently the healthcare status of Pakistanis, in
particular, females, is not up to the mark. According to the Human Development report of
UNDP (2001), female life expectancy in Pakistan is 65.1 years, higher than the male life
expectancy of 62.9 years; but it is lower than the female life expectancy in most
developing countries. The reasons for poor health (physical disabilities) include
malnutrition, bad sanitary conditions, and backward medical facilities which are the
outcomes of financial constraints. In the past few decades, it has been researched that the
rate of people bearing poor health are usually illiterate or semi-literate. Hence, education
has a direct link with health.

VARIABLES:
Following are the variables:

Independent
Growth Domestic Product (GDP), Education Expenditure (EXPE), Health Expenditure
(EXPH), Life Expectancy (LIFE), Literacy (LIT)

Dependent
Poverty (HCR)

DATA & METHODOLOGY
The survey data for this research has been taken from Economic Survey of Pakistan
2008, Pakistan Social and Living Standards Measurement Survey (PSLM 2006),World
Bank data sets, International Financial Statistics (IFS) etc. Following model has been
estimated to investigate the relationship of Education and Health on poverty in Pakistan.

Poverty, Health and Expenditure Equation
HCR = f (GDP, EXPE, EXPH, LIFE, LITI)
The Multivariate co integration methodology could be defined as:
(S)
t
= (GDP, EXPE, EXPH, LIFE, LIT)
The null hypothesis of non-cointegration among variables is rejected when the
estimated likelihood test statistic
i
o

+ =
=
p
r t
n
1
^
1 ln( {
i
} exceeds its critical value.
Error Correction Method (ECM) has also used to capture the short-run disequilibrium
situations as well as the long-run equilibrium adjustments between variables. Following
model has been estimated.

Poverty & Health and Education equation
c o o o o o + + + + + = ) ( ) ( ) ( ) ( ) ( ) (
4 3 2 1
LIT D LIFE D EXPE D EXPH D GDP D HCR D
O


The coefficients
1
o to show short run elasticities of the independent variables on
dependent variable. Whereas D stands for first difference and (-1) indicates lag value. c
is error correction term, adjustment coefficient..

Estimation and Results
First of all, we checked the stationarity of different variables that we used in our study.
For this purpose we applied Augmented Dickey-Fuller (ADF) test. Table 1 gives the
results of ADF tests. Results showed that these variables are integrated of order one i.e.
I(1).

Table 1. See Appendix
Table 2. See Appendix
Now we observed the association between the dependent (HCR) and independent
variables (Esucation and health) using the Multivariate Co integration Methodology. The
study finds that there is existence of statistically significant relationship between

dependent and independent variables. So improvement in education and health status
influence positively to alleviate poverty.

Table 3: See Appendix
Table 3.1: See Appendix
Table 3.2: See Appendix
Study finds a link between Poverty and other growth terms when allowing this
relationship to vary with other controlled variables. This seems to be good for poverty
alleviation when they allowing other well being indicators with GDP growth. In order to
check stability of long-run relationship between GDP and independent variables, we
estimate VAR Model.
Table 4: See Appendix

Table 4 indicates that education, life expectancy and literacy has a significant effect on
poverty at 5% confidence interval in the long run. Thus empirical results show that there
exists a long run relationship between them.

SUMMARY & CONCLUSION
From the above mentioned discussion, one reaches to the conclusion that there exists a
strong and effective relationship between poverty, education and health. The two main
factors that really play a pivotal role in poverty alleviation are better health and sanitary
conditions and productive quality education. Keeping in the mind these factors, the
current economic condition of Pakistan can be greatly improved by improving the health
and educational conditions.

REFERENCES

Anand, Sudhir., and Martin Ravallion (1993). Human Development in Poor Countries:
On the Role of Private Incomes and Public Services in The Journal of Economic
Perspectives, Vol.7, No.1. (Winter, 1993)

Becker, G. (1964). Evaluating the impacts of human capital stocks and accumulation on
economic growth: some new evidence. Oxford Bulletin of Economics and Statistics,
58(1), 9-28.

Fan, Shenggen., Peter Hazell, and Sukhadeo Thorat (2000) Government Spending,
Growth and Poverty in Rural India

Gupta, Indrani., and Arup Mitra (2004). Economic Growth, Health and Poverty: An
Exploratory Study of India in Developed Policy Review, Vol.22 (2004)

Equity and Development World Development Report 2006 (New York: Oxford
University Press)

Kemal,Amjad (1997) Structural Adjustment, Macroeconomic Policies, and Poverty
Trends in Pakistan.

Lawrence, John. E. S. (1992). Literacy and Resources Development: An Integrated
Approach in Annals of the American Academy of Political and Social Sciences, Vol.520,
World Literacy in the Year 2000

Maddala, G.S. (2001).Introduction to Econometrics, 3
rd
Edition. (England: John Wiley
& Sons Ltd.)

Mincer, J., 1974. Schooling, Experience and Earning. National Bureau of Economic
Research, New York, U.S.A.

Morrisson, Christian (2002). Health, Education and Poverty Reduction in OECD
Development Centre, Policy Brief No.19

Nurual Islam. Growth, Poverty, and Human Development: Pakistan

Pakistan Poverty Assessment (Poverty in Pakistan: Vulnerability, Social Gaps, and
Rural Dynamics) October 28, 2002

Sahibzada, Mohibul Haq (1997). Poverty Alleviation in Pakistan, Present Scenario and
Future Strategy (Islamabad: Institute of policy Studies)

Sekaran, Uma. Research Methods for Business (A Skill Building Approach), 4
th

Edition. (Carbondale: South Illinois University)

Wei, Li (1994). Human Resources Development and Poverty Alleviation: A Study of 23
Poor Countries in China in Asia-Pacific Population Journal Vol.9, No.3, September
1994













APPENDIX

Table 1. Augmented Dickey-Fuller (ADF) Test on the levels and on the First
Difference of the Variables (1980-2007)

Mackinnon Critical Values for
Rejection of Hypothesis of a
Unit Root
Variables Level First
Differences 1 % 5 % 10 % Decision Order

GDP 1.455 -4.596 -2.656 -1.954 -1.609 Non-stationary
at level but I(1)
stationary at first
difference
EXPE 0.0924 -3.088 -2.656 -1.954 -1.609 Non-
stationary
at level but I(1)
stationary at first
difference
EXPH -0.084 -5.477 -2.656 -1.954 -1.609 Non-
stationary
at level but I(1)
stationary at first
difference
LIFE 1.7101 -3.163 -2.656 -1.954 -1.609 Non-stationary
at level but I(1)
stationary at first
difference
LIT 2.0821 -3.243 -2.656 -1.954 -1.609 Non-
stationary
at level but I(1)
stationary at first
difference
POV -2.645 -2.964 -2.656 -1.954 -1.609 Stationary
at level but I(0)
non-stationary at first difference










Table 2: Poverty has a Unit root
Null Hypothesis: HCR has a unit root
Exogenous: Constant, First level
Constant First level
t-Statistic t-statistic
Augmented Dickey-Fuller test statistic -2.470130 -2.828
Test critical values: 1% level -3.724070 -3.724070
5% level -2.986225 -2.986225
10% level -2.632604 -2.632604
*MacKinnon (1996) one-sided p-values.



Table 3: Johansens Test for Multiple Cointegration Vectors Cointegration Test
among HCR, GDP, EXPE, EXPH, LIFE, LIT

Unrestricted Cointegration Rank Test (Trace)


Hypothesized Trace 0.05
No. of CE(s) Eigenvalue Statistic Critical Value Prob.**


None * 0.957054 182.0023 95.75366 0.0000
At most 1 * 0.873010 115.8985 69.81889 0.0000
At most 2 * 0.770990 72.56197 47.85613 0.0001
At most 3 * 0.721412 41.60820 29.79707 0.0014
At most 4 0.483170 14.76972 15.49471 0.0641
At most 5 0.042355 0.908844 3.841466 0.3404


Trace test indicates 4 cointegrating eqn(s) at the 0.05 level
* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values









Table 3.1 : Johansens Test for Multiple Cointegration Vectors Cointegration Test
among HCR, GDP, EXPE, EXPH, LIFE, LIT

Unrestricted Cointegration Rank Test (Maximum Eigenvalue)


Hypothesized Max-Eigen 0.05
No. of CE(s) Eigenvalue Statistic Critical Value Prob.**


None * 0.957054 66.10381 40.07757 0.0000
At most 1 * 0.873010 43.33655 33.87687 0.0028
At most 2 * 0.770990 30.95376 27.58434 0.0177
At most 3 * 0.721412 26.83848 21.13162 0.0070
At most 4 0.483170 13.86088 14.26460 0.0578
At most 5 0.042355 0.908844 3.841466 0.3404


Max-eigenvalue test indicates 4 cointegrating eqn(s) at the 0.05 level
* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values


Table 3.2 : Johansens Test for Multiple Cointegration Vectors Cointegration Test
among HCR, GDP, EXPE, EXPH, LIFE, LIT



Normalized cointegrating coefficients (standard error in parentheses)
HCR GDP EXPE EXPH LIFE LITERACY
-1.000000 2.48E-05 - 9.595014 4.650295 -15.67096 -0.403285
(2.2E-06) (9.63607) (7.06311) (2.28041) (0.69521)

Table 4: Vector Auto-Regression Estimates
Variables Coefficients t-Statistics
C 0.0045 10.40
DPOV(-2) -1.688 -5.138*
DEXPE(-2) 4.406 2.364**
DEXPH(-2) 0.645 0.2991
DLIT(-2) 5.5726 3.859*
DLIFE(-2) 2.541 3.201*
CE(-1) -0.0176 -5.80*
R-squared = 0.903 Adjusted- R squared = 0.795
ARCH LM Test F = 8.395*
Normality: Skewness and Kurtosis
Note: *(**) represents the coefficients are statistically significant at 1% (and 10%) levels.