Sunday, November 3, 2019

Upward Income Mobility in Pakistan Better Than in India and Most Other Nations

Economic mobility across generations, also known as intergenerational mobility (IGM), is a key measure of human progress. It shows that Pakistan is doing relatively well, according to a World Bank sponsored study. The analysis examines whether those born in poverty or in prosperity are destined to remain in the same economic circumstances into which they were born, and looks back over a half a century at whether children’s lives are better or worse than their parents’ in different parts of the world.

Inter-Generational Income Mobility Map of the World 2018. Source: World Bank

Intergenerational Income Mobility Study:

The World Bank study uses a newly created 2018 database—the Global Database of Intergenerational Mobility (GDIM)—that covers more than 95 percent of the global population.  Intergenerational income mobility measures how children's incomes compare with their parents' incomes at similar stages of life over a period of 50 years.

Inter-Generational Income Inequality Scatter Plot of the World 2018. Source: World Bank

The study found that higher intergenerational income mobility is associated with lower income inequality.

More and more Pakistanis are sharing in their nation's development, according to World Economic Forum (WEF). Pakistan ranks 47 among 74 emerging economies ranked for inclusive development by WEF released recently at Davos, Switzerland. Inclusive development in the South Asian country has increased 7.56% over the last 5 years. World Economic Forum assesses inclusive development  based on "living standards, environmental sustainability and protection of future generations from further indebtedness."

Educational Mobility:

Pakistan ranks among the 10 worst performing countries in absolute educational mobility, defined as the share of adults that are more educated than their parents, and relative mobility, defined as the correlation between individuals’ education and that of their parents.

Intergenerational Educational Mobility. Source: World Bank

In terms of intergenerational education mobility, only 9.4% of Pakistanis born in the bottom half make it to the top compared with a median of 15% among developing economies. Compared with other South Asian countries (in IGM in education), however, Pakistan (9.4%) is doing marginally better than India (8.9%) and Bangladesh (8.6%), but worse than Nepal (11.4%), Afghanistan (12.3%), Sri Lanka (15.9%), and the Maldives (24.8%), according to the World Bank.

Comparison of Intergenerational Mobility in Pakistan. Source: World Bank 


WEF Inclusive Development Report 2018:

The WEF inclusive development index ranks Pakistan at 47, below Bangladesh at 34 but above India at 62. The 7.56% rate of increase in inclusive development in Pakistan is higher than 4.55% in Bangladesh and 2.29% in India. China ranks 26 and its inclusion is rising at a rate 2.94%.

WEF IDI Rankings. Source: WEF

Pakistan has improved its ranking from 52 last year to 47 this year, while India's rank worsened to 62 this year from 60 last year.  China's ranking also worsened from 15 last year to 26 this year.

Another WEF report compiled by Oxfam said the richest 1% of Indians took 73% of the wealth generated last year.

Income Share Change in Asia's Poorest Quintile: 

The share of national income of Pakistan's poorest 20% of households has increased from 8.1% to 9.6% since 1990 , according to the United Nations Economic and Social Commission for Asia and Pacific (NESCAP) Statistical Yearbook for 2015.  It's the highest share of income for the bottom income quintile in the region.

The countries where people in the poorest income quintile have increased their share of total income include Kyrgyzstan (from 2.5 per cent to 7.7), the Russian Federation (4.4 per cent to 6.5), Kazakhstan (7.5 per cent to 9.5) and Pakistan (8.1 per cent to 9.6).  India's bottom income quintile has seen its share of income drop from 9% to 7.8%.

Bottom Quintile Income Share Change. Source: UNESCAP Statistical Yearbook

Although more people in China have lifted themselves out of poverty than any other country in the world, the poorest quintile in that country now accounts for a lower percentage of total income (4.7 per cent) than in the early 1990s (8.0 per cent). The same unfortunate trend is observed for a number of other countries, including in Indonesia (from 9.4 per cent to 7.6) and in the Lao People’s Democratic Republic (from 9.3 per cent to 7.6).

CPEC Transforming Least Developed Regions:

Development of China Pakistan Economic Corridor (CPEC) is transforming Pakistan.  Among the parts of the contry being transformed the most by CPEC are some of the least developed regions in Balochistan and Sindh, specifically Gwadar and Thar Desert. Here is more on these regions:

Gwadar Port City:

Gwadar is booming. It's being called the next Shenzhen by some and the next Hong Kong by others as an emerging new port city in the region to rival Dubai. Land prices in Gwadar are skyrocketing, according to media reports. Gwadar Airport air traffic growth of 73% was the fastest of all airports in Pakistan where overall air traffic grew by 23% last year, according to Anna Aero publication.  A new international airport is now being built in Gwadar to handle soaring passenger and cargo traffic.




In addition to building a major seaport that will eventually handle 300-400 million tons of cargo in a year, China has built a school, sent doctors and pledged about $500 million in grants for an airport, hospital, college and badly-needed water supply infrastructure for Gwadar, according to Reuters.

The Chinese grants include $230 million for a new international airport in Gwadar, one of the largest such disbursements China has made abroad, according to researchers and Pakistani officials.

New development work in Gwadar is expected to create as many as 20,000 jobs for the local population.

Thar Desert:

Thar, one of the least developed regions of Pakistan, is seeing unprecedented development activity in energy and infrastructure projects.  New roads, airports and buildings are being built along with coal mines and power plants as part of China-Pakistan Economic Corridor (CPEC). There are construction workers and machinery visible everywhere in the desert. Among the key beneficiaries of this boom are Thari Hindu women who are being employed by Sindh Engro Coal Mining Company (SECMC) as part of the plan to employ locals. Highlighted in recent news reports are two Hindu women in particular: Kiran Sadhwani, an engineer and Gulaban, a truck driver.

Kiran Sadhwani, a Thari Hindu Woman Engineer. Source: Express Tribune

Thar Population:

The region has a population of 1.6 million. Most of the residents are cattle herders. Majority of them are Hindus.  The area is home to 7 million cows, goats, sheep and camel. It provides more than half of the milk, meat and leather requirement of the province. Many residents live in poverty. They are vulnerable to recurring droughts.  About a quarter of them live where the coal mines are being developed, according to a report in The Wire.

Hindu Woman Truck Driver in Thar, Pakistan. Source: Reuters

Some of them are now being employed in development projects.  A recent report talked of an underground coal gasification pilot project near the town of Islamkot where "workers sourced from local communities rested their heads after long-hour shifts".

2012 Intergenerational Mobility Study:

A 2012 study of 22 nations conducted by Prof Miles Corak for the Organization for Economic Cooperation and Development (OECD) has found income heritability to be greater in the United States, the United Kingdom, Italy, China and 5 other countries than in Pakistan.

The study's findings, presented by the author in testimony to the US Senate Finance Committee on July 6, 2012, rely on the computation of "inter-generational earnings elasticity" which the author explains as follows:


"(It) is the percentage difference in earnings in the child’s generation associated with the percentage difference in the parental generation. For example, an intergenerational elasticity in earnings of 0.6 tells us that if one father makes 100% more than another then the son of the high income father will, as an adult, earn 60% more than the son of the relatively lower income father. An elasticity of 0.2 says this 100% difference between the fathers would only lead to a 20% difference between the sons. A lower elasticity means a society with more mobility."

Intergenerational Mobility in Pakistan:

Corak calculates that the intergenerational earnings elasticity in Pakistan is 0.46, the same as in Switzerland. It means that a difference of 100%  between the incomes of a rich father and a poor father is reduced to 46% difference between their sons' incomes. Among the 22 countries studied, Peru, China and Brazil have the lowest economic mobility with inter-generational elasticity of 0.67, 0.60 and 0.58 respectively. The highest economic mobility is offered by Denmark (0.15), Norway (0.17) and Finland (0.18).


The author also looked at Gini coefficient of each country and found reasonably good correlation between Gini and intergenerational income elasticity.

 In addition to Corak, there are other reports which confirm that Pakistan has continued to offer  significant upward economic and social mobility to its citizens over the last two decades. Since 1990, Pakistan's middle class had expanded by 36.5% and India's by only 12.8%, according to an ADB report titled "Asia's Emerging Middle Class: Past, Present And Future".

 More evidence of upward mobility is offered by Euromonitor market research indicating that Pakistanis are seeing rising disposable incomes. It says that there were 1.8 million Pakistani households (7.55% of all households) and 7.9 million Indian households (3.61% of all households) in 2009 with disposable incomes of $10,001 or more. This translates into 282% increase (vs 232% in India) from 1995-2009 in households with disposable incomes of $10,001 or more. Consumer spending in Pakistan has increased at a 26 percent average pace the past three years, compared with 7.7 percent for Asia, according to Bloomberg.

Summary:

The latest World Bank Study based on 2018 data shows that Pakistan continues to offer higher intergenerational economic mobility than most of the rest of the world. It reconfirms an earlier 2012 study of 22 nations by Miles Corak.   More and more Pakistanis are sharing in their nation's development, according to World Economic Forum (WEF). Pakistan ranks 47 among 74 emerging economies ranked for inclusive development by WEF released recently at Davos, Switzerland. Inclusive development in the South Asian country has increased 7.56% over the last 5 years. World Economic Forum assesses inclusive development  based on "living standards, environmental sustainability and protection of future generations from further indebtedness."

Related Links:

Haq's Musings

South Asia Investor Review

Pakistan Offers Higher Economic Mobility Than US, China

Pakistani-Americans Among Top 5 Most Upwardly Mobile Groups in US

Pakistan's Inclusive Growth

Pakistani-American Stars in "Big Sick" Movie

Pakistani-American Population Growth 2nd Fastest Among Asian-Americans

Silicon Valley Pakistani-Americans

A Dozen British Pakistanis in UK Pariament


2 comments:

Riaz Haq said...

World Bank Group
Pakistan@100
From Poverty
to Equity

Policy Note
March 2019

Intergenerational Income Mobility

Pakistan has made substantial progress in terms of poverty reduction and overall
improvementin standards of living over the past decades. The process of economic development
in Pakistan has led to absolute upward mobility across generations.

Children and youth living in today’s Pakistan experience a much higher quality of life than their grandparents. If we look at the
period from the early 1970s to the present, welfare as measured by GDP per capita (calculated in
2010 US$) increased 2.5 times from US$453 to US$1,178. Social indicators have also improved
significantly. For example, a child born in Pakistan today can expect to live, on average, more than a
decade longer than a child born two generations ago and achieve higher educational levels.
Nonetheless, the picture is less positive when considering intergenerational mobility (IGM) from a
relative perspective, that is, the extent to which an individual’s position on the economic ladder
within a society is independent of the position of the individual’s parents (Box 3).


Intergenerational Education Mobility


A recent report (World Bank, 2018b) analyzing trends in IGM in education across 146
countries indicates that Pakistan ranks among the worst performing countries in absolute
educational mobility, defined as the share of adults that are more educated than their parents, and
relative mobility, defined as the correlation between individuals’ education and that of their parents.
Pakistan also ranks among the 10 worst performing countries when looking at the share of
individuals in the 1980s’ generation who made it to the top quartile of education out of all those born
to parents with education in the bottom half of their generation. Ideally, if one’s ability to obtain an
education did not depend on how well educated one’s parents are, the share would be 25 percent. In
the case of Pakistan, only 9.4 percent of individuals born in the bottom half make it to the top
compared with a median of 15 percent among developing economies.

Compared with other South Asian countries (in IGM in education), Pakistan is doing marginally better than India (8.9 percent) and Bangladesh (8.6 percent), but worse than Nepal (11.4 percent), Afghanistan (12.3 percent), Sri Lanka (15.9 percent),
and the Maldives (24.8 percent).

http://documents.worldbank.org/curated/en/868741552632296526/Pakistan-at-Hundred-From-Poverty-to-Equity

Riaz Haq said...

An Analysis of Intergenerational Mobility in Pakistan Zahid Pervaiz & Shahla Akram


https://www.researchgate.net/publication/331345994_An_Analysis_of_Intergenerational_Mobility_in_Pakistan


Educational mobility in Pakistan surpasses income and occupational mobility at all point of times. In 2007, 34.68% offspring had an income which was greater than their fathers’ income. This slightly increases to 36.87% in the year 2015. Downward mobility of income at all point of times is higher than upward mobility. As far as educational mobility is concerned, 56.19% offspring had higher education (in years of schooling) than their fathers and 55.17% did so in 2015. Thus, although the majority of population has moved upward as compared with previous generation in terms of educational attainments yet the scenario is quite opposite in terms of income and professional mobility where either the majority has moved downward or it has remained in the same income or occupational group. Table 3 tries to explain this phenomenon of upward/downward mobility in a better and simple way by dividing the whole population into two income groups. Median/mean income has been used to divide whole population into low income (poor) and high income (rich) group.

Table 3 shows that in 2007, there was 72.98% likelihood that offspring of poor fathers will remain poor (earn income below median) whereas 27.02% of them have a probability to get out of poverty and enter into upper income group. The likelihood of remaining in the same low income group (below median) for those individuals whose fathers were poor decreased from 72.98% in 2007 to 64.02% in 2015. Thus an intertemporal analysis suggest that upward mobility of low income group has increased from 2007 to 2015 in the sense that they have now entered into better income group. But still immobility is too high particularly in low income group due to which poverty may persist. Same kind of picture emerges if we use mean income instead of median income as a threshold for dividing population into two groups of low income and upper income. Table 4 given below provides more in depth picture of movement of individuals from one income quintile to other income quintile viz-a-viz their father.

An interesting phenomenon is evident from figures provided in table 4: immobility is highest either among the poorest i.e. people belonging to first income quintile or among the richest i.e. people belonging to top income quintile. According to the matrix of year 2007, there was 36.8% likelihood that offspring whose parent fall in first income quintile will also remain in the same income quintile. Whereas this likelihood for top income quintile was 52.53%. It implies that persistence of status quo was highest in the rich class. Intertemporal analysis reveals that immobility has come down during the period of our study. Which implies that now there is slightly higher probability for offspring belonging to first income to move upward. Similarly there is more likelihood of downward mobility for 5th income quintile.