The Relationship between Poverty, Income Inequality and Unemployment: Evidence from ARDL and Bound Testing Approach

Abstract

The paper explores the impact of development expenditure, military expenditure, debt, political stability, foreign direct investment and inflation on poverty, income inequality and unemployment in the context of Pakistan. Time series uninterrupted data is used for the period 1980 to 2014. Income inequality is havoc by which income gap increases between rich and poor of society. Pakistan has an alarming situation of income inequality, poverty and unemployment rate as compared to other developing nations. The empirical findings confirm that increase in development expenditure causes a decrease in poverty and unemployment but inequality increases due to capitalism. There is a negative relationship between military expenditure inequality and unemployment. Foreign direct investment decreases inequality and unemployment. Results also show that political stability is responsible for increasing poverty and unemployment.