A Time Series Analysis of Forieng Aid and Income Inequality in Pakistan

Najid Ahmad; Sharafat Ali

Authors

Najid Ahmad
Sharafat Ali

Keywords:

foreign aid, growth rate, foreign direct investment, labor force, stationarity, cointegration, causality

Abstract

Pakistan economy is one those economies that has received a huge amount of foreign aid. Foreign aid has been considered to help capital-deficient economies to fulfill the desired levels of finances to generate growth, increase employment and income, and furthermore, it helps to alleviate poverty levels in the recipient economies. Present study focuses on the analysis of impact of foreign aid on income inequality in Pakistan. Since time series data is used for the analysis so the ADF and Phillip-Perron unit root test are applied to find out each of the time series to be stationary at its first difference. Johansen contegration test and vector error correction models are employed to examine the long run and short run impacts of growth, foreign aid, foreign direct investment, and labor force participation rate on income inequality, respectively. The cointegration test results confirm negative impact of economic growth on income inequality whereas foreign aid, foreign direct investment and labor force participation rate are concluded to have inequality increasing impacts. The results are statistically significant. Vector error correction model results showed long run causality as the coefficient of error correction term has the negative and significant coefficient. The Engle-Granger causality test showed bidirectional causality between aid and growth. The study also draws some conclusions and policy recommendations.

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How to Cite

A Time Series Analysis of Forieng Aid and Income Inequality in Pakistan. (2013). Global Journal of Management and Business Research, 13(30), 11-20. https://journalofbusiness.org/index.php/GJMBR/article/view/

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Author Biographies

Najid Ahmad

Najid Ahmad is an accomplished academic economist currently serving as an Associate Professor in the Economics department at Hunan University of Science and Technology, China. With a PhD in Economics from Dongbei University of Finance and Economics (2017) and an M.Sc in Economics from Bahauddin Zakaryia University, his research spans macroeconomic policy, foreign aid, income inequality, and urban environmental economics. He has published over 80 scholarly works, amassing more than 3,200 citations, with an h-index of 23 and an i10-index of 42. His notable papers include 'The Role of Budget Deficit in the Economic Growth of Pakistan' and 'A Time Series Analysis of Foreign Aid and Income Inequality in Pakistan'. Dr. Ahmad also contributes as a journal reviewer and holds an ORCID iD (0000-0002-7305-825X), an OpenAlex profile, and other academic identifiers. His current work examines the spatial effects of regulation on resident health in Chinese urban agglomerations.

Sharafat Ali

Sharafat Ali is an Associate Professor in the Department of Economics at Government Graduate College Kot Sultan, Layyah, Pakistan. He holds a PhD in Management Science and Engineering from Nanjing University of Aeronautics and Astronautics, China, and completed a Postdoctoral Fellowship at Infrastructure University Kuala Lumpur, Malaysia. His research spans development economics, poverty analysis, environmental management, and sustainable industrial production. With over 130 publications and nearly 3,000 citations, his work has significantly influenced policy discussions on income inequality, multidimensional poverty, and foreign aid effectiveness in Pakistan. Dr. Ali is an active member of the Pakistan Society of Development Economists and has served as a reviewer for several international journals. His current affiliations include research fellowships at Jiangsu University of Science and Technology and Ghazi University, reflecting his ongoing commitment to interdisciplinary and cross-border research collaborations.

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