Trends in Income Polarization in Pakistan: 1998-99 to 2018-19

Abstract

Polarization in context of income distribution refers to the decline of middle class. The present paper measures polarization for Pakistan and its rural and urban segments and the novel concept of time-decomposition of polarization. The HIES data source used for analysis of polarization trend. The period of analysis is from 1998-1999, 2001-2002, 2004-2005, 2007-2008, 2010-2011, 2013-2014, 2015-2016, and 2018- 2019 and skip the 2005-2006 and 2011-2012 surveys period because we see the polarization analysis in the gap period and these survey periods occur in the same period. The Bossert-Schworm measure (2006) has been used whereas the unit of measurement is household per capita income. It has been found that in general, throughout the period of analysis polarization followed increasing trend in Pakistan, its provinces and rural-urban segments. The overall trend of Pakistan is the mixture of rural and urban factors. In urban areas polarization trend decline and middle class strengthen, but polarization trend rising in rural areas. With respect to provinces, there are fluctuations in all period of analysis. In general, polarization trend increasing in all provinces. The time-decomposition of polarization has suggested that the decreasing mean incomes relative to the median of the higher income groups and the decreasing within group inequalities of both higher and lower income groups are among the major factors contributing to the change in polarization overtime in Pakistan.