Running Head: Economic Growth and Poverty 1

Assignment on

Economic Growth and Poverty

By XxX

Dated:
Economic Growth and Poverty 2

Impact of Remittances on Economic Growth and Poverty Reduction: Evidence from South or in

Pakistan

1.1. Background of Study

The study focuses on Economic expansion and growth, in certain period and how it is impacted

by Remittances, which are sent from abroad. Developing countries, which have huge Diaspora,

in foreign/developed countries, usually receive swelled remittances periodically. These

remittances aid developing country in number of ways. For instance, it directly impacts

consumption in short term, which increases demand and prices. The increase in demand and

prices acts as an incentive for the private sector to invest more in economy. The increased

investment increases employment and thus contributes to Economic growth and in curbing

poverty. As this phenomenon is very evident; therefore, it is natural that it is subject of interest.

In addition, in case of many countries, such as India, China, Pakistan and Bangladesh, these

remittances play huge part in economic growth and development.

For any developing country, it is imperative to increase employment and augment economic

growth. For this purposes, economies adopt various strategies and im0plement them through

different institutions. In recent decades, developing economies are using industrialization and

modernization of agriculture sector to improve economy. In this entire process, remittances that

are sent by nationals working or living abroad play huge part, especially in those Asiatic

societies, where family structure or unit is very strong.

The study emphasizes on the impact of remittances on economic growth and poverty. To be

specific, it aims to see the size of impact and the contribution of remittances, on economy,

demand, market and investment. It also intends to study how the increased economic activity

reduces unemployment and provides country to allocate its resources on other significant
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economic-social projects. For this purpose, the study has taken remittances as an independent

factor, whereas economic growth and poverty are dependent factors. In addition, several studies

have established negative correlation between economic growth and unemployment, which

implies that when economy grows, so does the employment and unemployment declines (OECD,

2007).

There are many studies, which have investigated correlation between poverty and economic

growth. Different studies have discerned different factors, which contribute to economic growth

and economic expansion. However, almost all studies have concluded that when economic

expansion occurs, it results inflation and most importantly employment. Inflation is usually the

result of augmented demand, which is good for economy and employment allows consumption

to swell.

There are various strategies, which are used by an economy, to increase employment,

consumption and investment, usually, for these purposes, expansionary economic policy is used,

which is devised, by keeping in consideration the National Marginal Propensity to Consume.

However, in this case, the factor, on which the study has focused, is foreign remittances. As per

previous studies, from country to country, the impact of foreign remittances varies, which is why

the study has great significance (Morrison, 2007).

From the study of literature, available on this subject and factors, we know that employment and

economic growth has positive correlation. This implies that poverty has negative relation with

economic growth and sustainable economic cause poverty to reduce. The impact of remittances,

on economic growth is also positive; however, the size of impact varies from country to country.

In modern times, from developing countries, there has been huge brain drain. This is because

many developing countries fail to produce lucrative opportunities and for that reason, highly
Economic Growth and Poverty 4

skilled individuals move to developed countries in search of better opportunities. However,

people from African and Asiatic Societies, where family is a strong unit, continue to facilitate

(monetarily) their families in form of remittances. These remittances increase consumption in

local markets, causing inflation, which acts as incentive for investors. Therefore, in

contemporary world, it is essential to study remittances and their impact in context of developing

countries.

1.2. Problem Statement

"The vicious circle of poverty has been observed in different regions of Pakistan. The

Remittances regarding the economic development and the reduction of the poverty must have to

justify the objectives and purposes for both, short and long run, to gain the valuable results and

relief for people. So far, these Remittances did not work well in the country, which is a big thing

to worry for the authorities"

The point of interest in this study is the reduction of poverty and the development of the

economic development in Pakistan. This is a fact that many people are living below the poverty

line. Unfortunately, the developments have not been made by the authorities for many years.

Therefore, this issue seems important regarding this county. Despite having the enough sources

and financial capabilities, things are not going well for people of Pakistan. Obviously, the

economy has to be developed to improve the living standard of people. Thus, there is a need to

focus on the Remittances in this country for developments and reduction of the poverty.

The available literature for this content is the international journals and surveys about Pakistan.

In addition, domestic and international markets are the key sources for us to navigate the

information and make the pertinent decisions. Furthermore, the literature can be derived through

the governmental institutions of the country, as all the statistics along with the necessary details
Economic Growth and Poverty 5

can be derived. Interestingly, in Pakistan, people are very responsive to the surveys in the big

cities. Thus, the survey based literature can be found in the national libraries is well.

This is a fact that there are many things that we do not know about Pakistan. Interestingly, this is

a bug thing to observe that rich people are becoming richer day by day. On the other hand, poor

people are still poor. This is a big difference that has been ignored in this country. Therefore,

different Remittances did not work well in this country. The difference in the society and the

development intentions are different from the authorities and the politicians in this country

The theoretical Gap has also been observed in regarding the Remittances for economic

development and the reduction of the poverty. This has been revealed that Population of Pakistan

aware of the facts and figures regarding the poverty and its impact. Therefore, there is a lack of

an intense work regarding the economic developments and the reduction of the poverty. This is a

big theoretical gap that may be faced by the author for this specific content.

The background regarding these Remittances also contains some gap. For Instance, authorities

claim that they have been investing in these sectors for many years. On the other hand, poverty

remains the same. Thus, the most important thing is to find the insights or barriers regarding the

developments and the rate reduction of the poverty in this country.

This study is beneficial for both, the county, researchers and people in the different regions. This

is good to illustrate the facts regarding the developments pans and the implementations to

eradicate the flaws. This is clear that the Remittances regarding the economic development and

the reduction of the poverty are not used in the right way. Thus, the demonstration of the facts

and the impaired implementations will aware the authorities and people, which is in the best

interest of the countries. The study contains significance, and it is worthy for the future
Economic Growth and Poverty 6

developments is well. The country has to grow rapidly but this is possible through the reduction

of the poverty and enhancement in the economic developments.

1.3. Purpose of Study

The Problem of the study is the poverty of countries of South Asia especially like the Pakistan.

There are two primary contexts of this problem. It determines that whether a country, such as

Pakistan, observes foreign remittance and whether it has an impact of Poverty reduction and

economic development.

The research is twofold as it observes the impact of foreign remittances on the overall context of

economic development and also on the poverty of the country. This gives rise to two research

questions.

1. Does foreign remittances have an impact on economic development.

2. Does foreign remittances have an impact on poverty.

The first question needs some sort of measure for foreign remittance over a couple of years as

this is forming to be a longitudinal study along with some indicator for economic development.

The second research question studies poverty, as the foreign remittances has already been

measured. Poverty has to be measured for the same period for Pakistan and the relationship

would prove or deny these research questions.

This is the potential direction of the research the research objective is to conclude whether

poverty is influenced by foreign remittances and whether it plays an important role in the

determination of its relationship with economic development. It can therefore be stated that the

conceptual model revolves around foreign remittances and its impact on the people and on the

economy.
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The overall direction of the research study is in the favor of the research questions and the

research objectives, but as the research is ever evolving and tentative in nature. It cannot be

determined for certain the overall proposition of the country and the propensity of its people.

Same can be said about the economy of Pakistan, as an under developed country the volatility in

the results variate to a significant magnitude.

References
Morrison, A. R. (2007). Gender equality, poverty and economic growth. World Bank

Publications, 1-10.

OECD. (2007). GROWTH BUILDING JOBS AND PROSPERITY IN DEVELOPING

COUNTRIES. Department of International Development, 1-25.

AMIN, T. (2015, June 15). Over 50 percent of population living below poverty line: World Bank.

Retrieved January 19, 2017, from Brecorder: http://www.brecorder.com/business-and-

economy/189:pakistan/1195906:over-50-percent-of-population-living-below-poverty-line-world-

bank/

Lakeertv.com;. (2014, March 27). Poverty in Pakistan 40 % people living below poverty line!

Retrieved January 19, 2017, from Lakeer TV: http://www.lakeertv.com/poverty-in-pakistan-40-

people-living-below-poverty-line.html

Pk.undp.org. (2016, June 20). Pakistans new poverty index reveals that 4 out of 10 Pakistanis

live in multidimensional poverty. Retrieved January 19, 2017, from UNDP:

http://www.pk.undp.org/content/pakistan/en/home/presscenter/pressreleases/2016/06/20/pakistan

-s-new-poverty-index-reveals-that-4-out-of-10-pakistanis-live-in-multidimensional-poverty.html
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Yousafzai, F. (2016, June 21). New poverty line marks 39pc Pakistanis as poor. Retrieved

Jaunary 17, 2017, from The Naition: http://nation.com.pk/newspaper-picks/21-Jun-2016/new-

poverty-line-marks-39pc-pakistanis-as-poor