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International Research Journal of Finance and Economics ISSN 1450-2887 Issue 52 (2010) © EuroJournals Publishing, Inc. 2010 http://www.eurojournals.com/finance.htm

Does Education Alleviate Poverty? Empirical Evidence from Pakistan Imran Sharif Chaudhry Associate Professor of Economics. Bahauddin Zakariya University Multan, Pakistan E-mail: imranchaudhry@bzu.edu.pk Shahnawaz Malik Professor of Economics, Bahauddin Zakariya University Multan, Pakistan E-mail: shahnawazmalik@bzu.edu.pk Abo ul Hassan Ph.D Research Fellow, Department of Economics, Bahauddin Zakariya University Multan, Pakistan E-mail: adam_smith_17@hotmail.com Muhammad Zahir Faridi Lecturer, Department of Economics, Bahauddin Zakariya University Multan, Pakistan E-mail: zahirfaridi4u@yahoo.com Abstract Poverty has become a sensitive and ever remained issue almost in all developing countries of the world. Education plays a vital role in poverty alleviation. Therefore, it is important to investigate that whether different levels of education or literacy cause to alleviate poverty. The major objective of this study is to evaluate the effects of different levels of education and literacy on the incidence of poverty in Pakistan. Our results suggest that poverty alleviation process would be accelerated if resources are targeted at education sector especially in higher education. Pakistan presents a paradoxical situation. Until the late 1980s Pakistan had achieved a spectacular record of economic growth and reduced incidence of poverty remarkably, but the country had horrible social indicators. However when social indicators began to improve in the 1990s for a variety of reasons, both internally and externally driven, the average rate of economic growth declined. Contrary to the said situation, the general perception about Education is that the role of education in poverty alleviation, in close co-operation with other social sectors, is crucial. This paper is mainly intended to explore the reality that to what extent education is affective in poverty alleviation in Pakistan. In addition, some important macroeconomic variables have also been taken understudy to find out the reality of the problem.

Keywords: Education; Poverty; Inflation; Economic Growth; Openness; Pakistan

International Research Journal of Finance and Economics - Issue 52 (2010)

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I. Introduction
Poverty is a multidimensional phenomenon, encompassing inability to satisfy basic needs, lack of control over resources, lack of education and skills, poor health, malnutrition, lack of shelter, poor access to clean water and sanitation, vulnerability to shocks, violence and crime, lack of political freedom and voices. The poor are the true poverty experts. They assert on material well being, physical well being, social well being, security of food, security of law and order, public safety, safety from violence and civil conflicts, freedom of choice and action, being a part of the decision making body rather to be a victim of decision making body and the security of jobs. Poverty can be looked at from different angles and depending upon the perspective one adopts definitions of poverty may vary. It differs from country to country and from context to context. Poverty may be absolute or relative. Absolute poverty can be eradicated but relative poverty cannot. Relative poverty is a dynamic concept because it involves comparison between groups. It exists in all parts of the world, either in packets or on a much larger scale. In Pakistan both absolute and relative poverty exists normally, poverty is measured in monetary terms. The causes of poverty are also multidimensional.1 There is no single cause that can explain it fully. Poverty is often related to a number of factors: physical, psychological, economic and sociocultural. Among the physical factors accounting for poverty are an unfavorable natural environment and lack of basic physical and economic infrastructure. These may also relate to...
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