Muhammad Ali Jinnah University

Assignment# 2

Advance Development Economics

TOPIC:

Poverty

Submitted by: Sumair Gowani (SP19-MSEF-0015)

Submitted to: Sir Afaq Ali Khan

 Poverty
Answer 1:
There are two ways to measure inequality of income, the size distribution and functional
distribution of income. In size distribution, the income of the population is gathered and
arranged in ascending order. The data is separated into groups from here, typically 5
quintiles representing 20% each. From here the percentage of total income received by
each quintile is calculated and determined. From here the Kuznets ratio can be calculated
from this by taking the ratio of income of top 20% to income of bottom 40%.The theory of
Functional Distribution of income explains how income is divided between groups that
take part in the production process; usually the income earned by the "owners" of various
factors or steps in production. This income can be determined by the supply and demand
for the end goods produced by each of them. By looking at a large firm that requires
multiple steps in production where the good passes through different departments before
becoming a final good; each department will have individual costs, such as labor,
materials, and overhead, but will share an overall fixed cost, profits will be used to pay for
each department’s individual costs

Answer 2:
The Lorenz curve is a graphical representation of the distribution of some measure
income, consumption, education, etc. -- among a population of people, households, or
other units. The Gini coefficient is a numerical measure of inequality, which can be easily
related to the Lorenz curve.

The Lorenz curve is an indication of the income distribution in a population. At one

extreme and unrealistic case, we would have the perfect distribution line, in which case
all inhabitants in a given population would have the same income. In this case, the Gini
coefficient would be 0.

At the other extreme, we would have the Lorenz curve at the very bottom, whose shape
would have transformed into two straight lines at a right angle on top of x axis and on the
right y axis. This would also be an unrealistic case, meaning that one person receives all
income from the whole population.

In reality, the Lorenz curve will always be somewhere between the perfect distribution line
and the x axis.

In the example below, we can see that the bottom 20% of the population receives less
than 5% of the entire income, while 80% receives about half the income, which leaves
the top 20 percent with the other half.
Answer 3:
Economic growth is concept that focus on overall factor of economy of particular nation and
does not focus on particular group of people. Nation who want to attain absolute poverty needs
to think more than just economic growth, they must have to allocate higher number of resources
to people who come under extreme poverty class. Economic growth is essential element for the
eradication of absolute poverty but you can achieve it by better income distribution in all group
of people.

When economic growth increase and that reduces the poverty, those people who comes
out of poverty line find it extremely difficult to improve their living conditions. Income
inequality is the main reason behind the poverty and where the inequality will reduce
poverty will automatically reduce. Income distribution is great factor in reducing this
inequality, better the income distribution it will better the eradication of income inequality
and this can not be done only by attaining economic growth. Government should have to
form policies that take care of income distribution. In order to reduce the poverty
government, need to assess where the poor live and work. Working in better place and
in better industry will enhance the living standard and will reduce the poverty line in
particular nation.
Answer 4:
1. Altering the functional distribution: artificially increased modern-sector wages
reduce the rate of modern-sector enlargement growth, thus harming the poor. Measures
designed to reduce the price of labor relative to capital will cause employers to substitute
labor for capitalin their production activities. Higher level of employment.

2. Mitigating the size distribution: reducing the concentrated control of assets, the
unequal distribution of power, and the unequal access to educational and income earning
opportunities that characterize many developing countries. The distribution of these asset
holdings and skill endowments ultimately determines the distribution of personal income.

3. Moderating(reducing)the size distribution at the upper levels through progressive

taxation of personal income and wealth. Such taxation increases government revenues
that decrease the share of disposable income of the very rich revenues that can be
invested, thereby promoting inclusive growth.

Regressive tax: structure in which the ratio of taxes to income tends to decrease as
income increases.

4. Moderating (increasing) the size distribution at the lower levels through public
expenditures of tax revenues to raise the incomes of the poor either directly (e.g., by
CCTS) or indirectly (e.g., through public employment creation). Such public policies raise
the real income levels of the poor above what their personal income levels would
otherwise be.

Workfare program: A poverty alleviation program: work in exchange for benefits.

Answer 5:
1. Land Reforms: In order to correct the land distribution and improve the living
standards of the rural poor.
2. Agricultural Growth and Rural Poverty: In addition to land
reforms, agricultural growth in China played a key role in rural poverty reduction.
A Research in 2012, shows that the higher the Agriculture growth the higher the
GDP.
3. Rural Non-farm Economy: The agricultural growth, alone, is not
sufficient for rapid rural poverty reduction, because its benefits in the past have
accrued mainly to households with access to land, and the majority of the rural
households does not own land. Thus, an increase in rural non-farm incomes, in
addition to increases arising from growth linkages associated with increases in
agricultural incomes, is critical for rapid rural poverty reduction
 4. Urbanisation: The growth of the non-farm sector, also, has a strong
association with the growth of towns and cities, which provide job opportunities to
labour that could not be absorbed in the rural economy. Job opportunities in the
rural sector, both agricultural and non-agricultural, are limited in Pakistan.

Answer 6:
Land reform involves the changing of laws, regulations or customs regarding land
ownership. Land reform may consist of a government-initiated or government-backed
property redistribution, generally of agricultural land. Land reform can, therefore, refer to
transfer of ownership from the more powerful to the less powerful, such as from a
relatively small number of wealthy owners with extensive land holdings to individual
ownership by those who work the land. Such transfers of ownership may be with or
without compensation; compensation may vary from token amounts to the full value of
the land.

Land reform may also entail the transfer of land from individual ownership even peasant
ownership in smallholdings to government owned collective farms; it has also, in other
times and places, referred to the exact opposite: division of government-owned collective
farms into smallholdings. The common characteristic of all land reforms, however, is
modification or replacement of existing institutional arrangements governing possession
and use of land.

Land Reform in Pakistan Since 1947 onwards

At the time of Independence, the first government review of land and tenure reforms was
tackled in the province of Sindh. Constituted by the Government of Sindh in March 1947,
the Government Hari Enquiry Committee (1947-48) declared that the problems of Haris
were of the their own creation or natural problems or government neglect, the landlord
(jagirdar, zamindar, sardar, etc) was in fact a friend of the hari and land reforms were
deemed undesirable and even a loss for the hari.

One member of the committee however dissented with the majority opinion and his
minute of dissent was not published until April, 1949. The dissenter, Muhammad Masud
an ICS officer wrote that the condition of haris was deplorable, the differences between
the landlord and the hari too severe and unfair and therefore land reforms were
necessary. In his notice of dissent, he recommended abolishment of zamindari system,
expropriation of land from landlords with minimum compensation, and that absolute
ownership of land be vested in the State.

The Pakistan Muslim League constituted a five-member committee, headed by Mian

Mumtaz Khan Daultana, in February 1949 to recommend necessary actions that must be
taken in order to bring drastic changes to the existing system of land tenure. The
committee presented its report in June 1949, often called the Agrarian Reforms
Committee. It proposed short term measures ranging from security of tenure, abolition of
jagir and inam, reduced share of owner from share croppers and abolition of occupancy
tenancies. The long term measures proposed included restriction on large land ownership
and expropriation of excess land to cultivating tenants – with compensation. The report
suggested “seek adjustments of the social structure in an evolutionary rather than violent
manner” – in other words, ceiling on land holdings was too drastic and should be avoided,
a classic attempt at trying to appease both the masses and its party members from West
Pakistan – most of whom had large land holdings. The recommendation on land holdings
– to be implemented at a later time – was 150 acres for irrigated and 450 acres for un-
irrigated land and the committee was undecided on the issue of land redistribution,
proposing three alternatives.

Keeping in line with the short-term measures proposed, The Provincial Tenancy Acts
(1950) were implemented in Sindh, Punjab and NWFP between 1950 and 1952 –
although did very little to alleviate the problems of the farmers. Note that nothing was
done to help the farmers of Balochistan and the princely states (Bahawalpur, Khairpur,
etc.). Later, the First Five Year Plan of 1955-1960 proposed similar land holding ceilings,
again never to see the light of day.

Ayub Khan’s reforms

The first of our self-styled savior generals also disliked the notion of feudalism. A
commission was set up present recommendations and it presented its report within three
months of the military takeover in January, 1959. The recommendations were put into
force through the Martial Law Regulation No. 64 on February 7, 1959.

• 2.5 million acres of land was resumed

• 2.3 million of it distributed amongst 183,271 tenants and small owners

• By another account, the government overtook only 35% of the holdings that
exceeded the ceiling.

Zulfiqar Ali Bhutto and land reforms

Riding a wave of socialism, a feudal lord from Sind came into power after the country split
into two. As the Civilian Martial Law Administrator (CMLA) and then President, he
promulgated on March 1, 1972, Martial Law Regulation No. 115 of 1972, often called
Land Reforms Regulation 1972. The reforms failed to produce the expected results and
a second wave of reforms were introduced through the Land Reforms Ordinance, 1977
(Ordinance II of 1977) on January 5, 1977. Ceiling on land holdings was reduced to 100
acres for irrigated land and 200 acres for un-irrigated land, this time compensation was
to be given to the landowners.

Effects of 1972 and 1977 reforms

The reforms did not yield the expected results due to a variety of reasons which I cannot
go into due to the paucity of space. However, the commonly held view that it somehow
“failed” merely due to the lack of application of the law (accompanied by lack of
enthusiasm for it) is not necessarily wrong but is a very big simplification that ignores
other causes (benchmark used being 1940 productivity, etc.) and is aimed at vilifying the
intentions of the people who brought them forward.

Meanwhile, wage laborers in rural areas had become a burning socio-economic issue.
Needless to say, the reforms did not radically change the nature of land tenure in the
Pakistan in practice, however it infuriated the landed aristocracy, who were up in arms
over the issue and the 1977 abolition of exemption to religious holdings sent the religious-
political groups running around with their slogans against land reforms.

The future of land reforms

In the mode of the classical application of land reforms vis a vis ceiling on land holdings,
the door for reform is pretty much closed unless the state wishes to undertake the thorny
issue of the nature of land ownership at the time of Independence. Fact is that the use of
Islamic notion of social welfare no longer is applicable in order to justify state intervention
in property rights of individuals. Justice (R) Dr. Tanzilur-Rahman, ex-Chief Justice of the
Federal Shariat Court had proposed “setting up a high powered National Commission for
Lands… to make country-wide inquiries and investigations as to the mode of acquisition
of the lands by the landlords and their predecessors-in-interest, and to determine whether
they are valid or not in the eye of Shari‘ah.[

Given the colonial history of the region, it is a known fact that modern property laws were
introduced and recognized in this region by the British by virtue of the capacity of the local
individuals to extract revenue for the colonial state. Some of these individuals had already
been collecting revenues for the Mughal state as jagirdars, but their rights over the land
were not recognized in manner as they were recognized by the British (the exclusive right
of enjoyment etc., for example). Many, who acquired title through settlements, did so for
the first time by virtue of their ability to coerce the local population and collect revenue. In
such a historical background, it is contended that, regardless of the prohibitions imposed
by the Qazalbash Waqf Case, land reforms based on ascertaining the legality of title
through the formation of a National Commission as mentioned above, and requiring the
acquisition of property without compensation in case of an illegitimate title, holds great
promise in furthering the cause of re-distributing land among landless tenants and farm
laborers of the country.
If we are to review that situation and perhaps deem land granted by British (for services
to the crown) as illegitimately acquired owing to their shady origins, then we are looking
at a wholly different scenario. That will also raise questions as to whether land grants
post-Independence in the form of huge agricultural and urban land grants largely to
military officers, but to bureaucrats and other state functionaries as well are illegitimately
acquired. Certainly, this is far from realizable. However, it still remains a possibility for
future legislators.

Another possibility that lays at the doors of the legislators, is to review the existence of
the Federal Shariat Court (and the Shariat Appellate Bench) itself and there-after re-
introduce legislation along the lines of the ’72 and ’77 reforms. Certainly, this too is a non-
realizable one – at least in the short term – considering the power of the religious groups
and the right wing, both street power and their vocal power. If such a radical step were to
be taken, it would not be surprising that the legislators would be declared enemies of
Islam, traitors, agents and the usual labels.