Income Inequality and Economic Welfare: A Decomposition Analysis for the Household Sector in Pakistan

The prime goal of economic policy is economic growth, as such the growth performance of a country has become a major criterion for judging its economic performance. GNP per capita is held to be the objective measurable counterpart of economic welfare, which means that part of total state of satisfaction, which depends on economic activity. An increase in GNP per head is supposed to mean an increase in economic welfare. Despite substantial increase in per capita incomes of most of the developing countries, poverty has remained widespread and in many countries, the problem has been aggravated by a very rapid increase in income inequalities. Thus, a country’s development can only be accomplished if everyone contributes and the gains of development are fairly distributed.