Introduction:

Education upgrades the capacity,
ability and widens the psychological skylines of the human judgment and cause.
Education is a standout amongst the most crucial elements of human capital. It
is a multidimensional process and it additionally assumes the crucial part in
the upgrade of the financial development of a nation. Every single developed nation
is produced because of putting resources into education. Income inequality and poverty
is also decreased with the help of education as there are solid linkages
between them. The poor areas of developed societies have caught bigger offer of
the benefits of their economic development and advancement because there is
great fairness in the distribution of educational opportunities in developed
countries.

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The purpose of this study is to investigate different main
elements for deciding the impacts of education, physical capital and poverty on
economic growth and development in Pakistan. This paper is a qualitative
research paper and the investigation depends on the interpretive
phenomenological approach which investigates the different features on the
income inequality and education in developing countries, particularly in
Pakistan. This study also clarifies that how we can decrease the pay imbalance
in Pakistan. The extent of this paper is that it will put a further light on
the issues Pakistan is confronting or had confronted and help individuals to
adjust it. The following is the research question of this paper:

·        
What is the relationship between education and
income inequality in Pakistan and what are the ways to reduce income inequality
in Pakistan?

Literature review:

There are many elements affected by
inequality in distribution since the starting of the time and it is also
observed by many people (Ahmad, 2013). Even from human’s move to the planet it
is investigated by many researchers that there are many different components of
development that are affected by economic inequality. Education is one of the
main components of development. And it is also one of those components which are
affected by income inequality. It is important for a country to spend on its education
to succeed in every field, because education provides many benefits for people.
It increases the efficiency and productivity of people. The general public
obtained exceptional victory in every field when the government spent great sum
for the educational advancement (Carstensen, 2013). Nations with high wage
imbalance have low literacy rate and in addition insignificant educated work
force (Nolan et al., 2014).

 Pakistan is a nation which is facing no proper
distribution of wealth and extreme income inequality. Large part of the
population of Pakistan is associated with the agriculture industry, but the
main problem is that the industry is controlled by the elite landlords having
both political and financial power. These elites rarely pay the poor workforce
of the country. This is the main reason of income inequality in large part of
the population. Due to scarce resources the poor people are unable to send
their children to school. Another reason causing income inequality in Pakistan
is that a large amount of share of the agriculture sector is transferred to
other sectors, many people are losing their jobs and this is also increasing
income inequality in the region (Zhuang, Kanbur, & Maligalig, 2014).
Transfer of agriculture sector’s share to the other sectors is preventing the
poor people from using sufficient education opportunities as they are pushed to
the lowest level of poverty. Another major reason of income inequality is that
the elites of Pakistan are paying fewer taxes for their high income level and
the poor people are paying high level of taxes for their low income level. This
regressive taxation system of the country is once again not letting the poor
people to avail education opportunities.

                The
fact of economic growth explained by Mohammed Farooq (2010) which is observed
at a higher level that in many nations there is a low rate of wage imbalance
and appropriate distribution of basic necessities because in such countries
education is a basic necessity and being in approach of each single resident.
Education is a vital element of human capital which continuously upgrades the
capacity and widens the critical thinking of human mind. Therefore in countries
where there is more prominent value in distribution of education, the poor
people of these societies have availed and appreciated the share of the
benefits of national economic growth.

Theoretical framework:

                Many researchers
explained the inverse relationship between income inequality and education. Psacharopoulos,et
al., Park and De Gregorio (1995) has demonstrated an inverse relationship
between a country’s normal education level and wage disparity. It is
understandable that a population’s average education level grows the strength
it causes to decrease income inequality. Some researchers inspected the number
of enrolments in education based on income inequality. A study by Alderson and
Nielson (2002) and a study by Barro (2000) explained that number of enrollments
particularly at the secondary level with diminished in pay imbalance. But
according to Barro (2000) there is a reverse connection between primary
education enrollments and income inequality as well as direct relationship
between higher education enrollments and Income inequality.

Geographical Inequality in Pakistan

Azfar (1973), Bergan (1967) and Khilji (2007) are the
researchers who calculated the Gini-coefficients for the rural and urban areas
based on the education division. According to Bergan income inequalities in
Pakistan were very were little as contrasted with different developing nations.
In case of education inequalities in rural areas were lower than urban areas.
The value computed for Gini-coefficient for urban zones was 0.430, rural areas
0.357 then again estimation of the Gini-coefficient for Pakistan was computed
as 0.381. The Gini-coefficients calculated by Azfar (1973) decreased to 0.424 for
urban areas and 0.334 for rural areas. On the other hand Gini-coefficient for
both the rural and urban zones together declined from 0.381 to 0.365. Malik (1996)
explained that parents living in rural regions of Pakistan are uneducated and
not very much aware of education and its significance. Literacy rates in rural
areas of Pakistan are lower in contrast to urban areas. There is a positive
relationship between household’s education accomplishment and its income.

 

Human Capital and Income Inequality

Education is a key component of human capital. Countries
cannot develop and attain growth without education. Education is the first step
in development and growth process according to Raja (2000). It gives two
favorable circumstances; firstly it expands the economic development of a
country, secondly it decreases poverty and helps in growing productivity. For
the spreading and adoption of new technologies it is vital to have a
well-educated labor force. In Pakistan there is shortage of physical and human
capital. Quantity as well as nature of education at each level requests for
abilities to accomplish a decent economic growth rate explained by (Adawo, 2011).

Agriculture Sector and Income Inequality

Agriculture sector utilized more than 45% of its aggregate
population in Pakistan. 85% are small farmers out of the percentage. The sample
of 300 small farmers of central Punjab was used by (Sabir, Hussain & Saboor,
2006) to explore the status of poverty among them. These researchers found that
education is the main factor that could decrease poverty and , old age of the
head of family unit, substantial size of family unit, little yield and low
cost, dependency ratio and insufficiency of infrastructure are the couple of
determinants of high poverty in central Punjab, Pakistan.

Gender Inequality

Gender inequality is stopping access to education
facilities, improves poverty level and creates leaps in the financial development
of a country. Chaudhry and Rehman (2009) have evaluated with the help of Logit
regression model that in Pakistan the size of family unit and female to male
proportion has notable and also positively effect on poverty. On the other side
female to male enrollment proportion in educational institutions, education of
head of family, literacy proportion of female to male and proportion of workers
of female to male have been altogether negatively influenced the rural poverty.

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