Trends in Inequality in Pakistan between 1998-99 and 2001-02

Although there has been a much debate on poverty in Pakistan in recent time, the discussion on inequality remained limited. Poverty and inequality are closely linked—for a given mean income, the more unequal the income distribution, the larger the percentage of the population living in income poverty. Thus, incomes at the top and in the middle of the distribution may be just as important to us in perceiving and measuring poverty as those at the bottom. It is, thus, important to monitor the whole income distribution rather than merely the bottom of distribution. The issue of income inequality in Pakistan has been important in the policy discussions since the early 1960s. Since then, a number of attempts have been made to estimate the income or expenditure inequality using the Household Income and Expenditure Survey (HIES) data. However, a perception of increasing absolute poverty in Pakistan has shifted the focus of studies from inequality (or relative poverty) to absolute poverty. Consequently, a number of attempts have been made by various authors/institutions to estimate the poverty in Pakistan in the 1990s. The debate on trends in poverty during the 1990s—an era of stabilisation and structural adjustment has been wide-ranging in Pakistan. However, there is no discussion on the changes in income distribution from the policy and institutional reforms. World Bank (2003); FBS (2001) and Kemal (2003) are only three exceptions. While the former two studies report Gini Coefficients in their studies on absolute poverty in Pakistan without explaining its variations over time, the latter study is a comprehensive review on the income distribution in Pakistan. It is this context that guided the author to evaluate the trends in inequality in Pakistan using the most recently available household data sets—PIHS 1998-99 and 2001-02. The results for the year 2001-02 are being presented for the first time, which should be useful to