Ninth Annual Conference on Management of the Pakistan Economy Human Capital Development for Sustained Economic Growth/ Measuring Differential Economic Impact of Education across Income Groups and Provinces in Pakistan: A Model Consistent Approach

Abstract

Engel’s law, an empirical regularity observed for around 200 years, states that the share of food in household expenditure declines with households’ total expenditure. The empirical regularity expressed in Engel’s law is clearly present in existing Pakistani household income and expenditure data. Using economic theory an ‘Engel Curve’, reflecting Engel’s Law, can be extended to allow for additional effects of a social nature, including the influence of education on welfare and considering education as the ability to purchase things. Yet to our knowledge this has not been exploited in empirical research to infer the differential impact of education on measures of household wellbeing across income groups and provinces. The study will address this welfare analysis gap. Our Engel curve specifications close the gap between economic theory and empirical applications critical to evaluating the effects of education on economic wellbeing. The results show that net primary and matriculation education enrolment ratios may bring a significant improvement in the welfare of people. There is a need to specifically redirect resources to Balochistan where access to educational opportunities is rather low. The access to educational opportunities should be increased in Sindh and KPK as well. Such steps are required to bring inter provincial harmony in Pakistan. The people fall in the lowest two income groups worse off in terms of access to educational opportunities from 2008 to 2011. So efforts should be stepped up to enhance the access to educational opportunities at primary and matriculation levels across these lowest income groups. These informed predictions can guide policy advisors on where to concentrate efforts and reduce economic distortions. Our Engel curve oriented research approach is in line with the theme of conference “Human Capital Development for Sustained Economic Growth”, as focused efforts can energize the citizens of Pakistan and re-track the economy on a sustainable path in the long run.