Growing Incomes and Economic Mobility in Pakistan

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 recent 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.

Mobility Drivers:

The study identified three key drivers of inter-generational mobility: Family, Labor Market and State.

The biggest difference the family makes is in terms of education and training of the children. Growing labor market is important for the availability of better paying jobs, and the state matters because its policies influence access to education and growth of economic opportunities. For Pakistanis, the weakest link here has been the state which has failed to adequately fund education and facilitate economic growth through infrastructure investments. The private sector, the civil society and the international community have, however, stepped in to at least partially compensate for some of the most serious shortcomings of the state.   

Education:

Pakistani parents are taking education more and more seriously and enrolling their children at all levels. According to Harvard University researchers Robert Barro and Jhong-Wa Lee, Pakistan has been increasing enrollment of students in schools at a faster rate since 1990 than India. In 1990, there were 66.2% of Pakistanis vs 51.6% of Indians age 15 and above who had no schooling. In 2000, there were 60.2% Pakistanis vs 43% Indians with no schooling. In 2010, Pakistan reduced it to 38% vs India's 32.7%.




As of 2010, there are 380 (vs 327 Indians) out of every 1000 Pakistanis age 15 and above who have never had any formal schooling. Of the remaining 620 (vs 673 Indians) who enrolled in school, 22 (vs 20 Indians) dropped out before finishing primary school, and the remaining 598 (vs 653 Indians) completed it. There are 401 (vs 465 Indians) out of every 1000 Pakistanis who made it to secondary school. 290 (vs 69 Indians) completed secondary school  while 111 (vs. 394 Indians) dropped out. Only 55 (vs 58 Indians)  made it to college out of which 39 (vs 31 Indians) graduated with a degree.

Labor Market:

Pakistan's employment growth has been the highest in South Asia region since 2000, followed by Nepal, Bangladesh, India, and Sri Lanka in that order, according to a recent World Bank report titled "More and Better Jobs in South Asia".



Total employment in South Asia (excluding Afghanistan and Bhutan) rose from 473 million in 2000 to 568 million in 2010, creating an average of just under 800,000 new jobs a month. In all countries except Maldives and Sri Lanka, the largest share of the employed are the low‐end self-employed.



The report says that nearly a third of workers in India and a fifth of workers in Bangladesh and Pakistan are casual laborers. Regular wage and salaried workers represent a fifth or less of total employment.

Analysis of the labor productivity data indicates that growth in TFP (total factor productivity) made a larger relative contribution to the growth of aggregate labor productivity in South Asia during 1980–2008 than did physical and human capital accumulation. In fact, the contribution of TFP growth was higher than in the high‐performing East Asian economies excluding China.

Summary: 

The experience of OECD nations shows that construction of a large and vibrant middle class is an absolutely essential pre-requisite for a prosperous and democratic society.  In spite of all of its current difficulties, Pakistan's middle class is growing as evident from data coming from a variety of sources ranging from ADB and the World Bank to University researchers and Euromonitor consumer research firm.  More enlightened leadership in Islamabad can help accelerate this process by focusing greater attention to raising more revenue and increasing public investment in education, health care and infrastructure.

Related Links:

Haq's Musings

Economic Mobility Across Generations

Upward Social and Economic Mobility in Pakistan

Pakistan GDP Grossly Underestimated, Shares Highly Undervalued

Investment Analysts Bullish on Pakistan

Precise Estimates of Pakistan's Informal Economy

Pak Consumer Boom  Fuels Underground Economy

Rural Consumption Boom in Pakistan

Pakistan's Tax Evasion Fosters Aid Dependence

Poll Finds Pakistanis Happier Than Neighbors

Pakistan's Rural Economy Booming

Pakistan Car Sales Up 61%

Resilient Pakistan Defies Doomsayers

Land For Landless Women in Pakistan

Pakistan's Circular Debt and Load-shedding

Hypermart Pakistan

Comments

Riaz Haq said…
Here's a BR report on new US Ambassador's thoughts about Pakistan:

In the brief few weeks that the new US ambassador Richard Olson has been in Pakistan, he is said to have been struck by the tremendous economic potential Pakistan possesses and by the industriousness and vitality of its people.

According to him, he has also been pleased to see the many ways in which the United States is working with Pakistan to harness this potential to create a brighter economic future for the people of Pakistan. Here are a few examples:

Boosting agricultural output: To generate jobs and higher incomes among the 45 percent of the population employed in agriculture, the United States helped train 14,000 Pakistani farmers to better protect their livestock from disease, improve the quality of their products, and achieve profitable growth. We're also helping to build new irrigation canals that will expand arable land by more than 200,000 acres.

Building roads for greater trade: To connect communities and facilitate trade, the United States is helping to build more than 1,000-km of roads in Fata, Khyber-Pakhtunkhwa, and Balochistan. The Peshawar-Torkham Highway reconstruction is also underway and it will connect Jamrud and Landikotal tehsils in Khyber Agency with the city of Peshawar to foster regional trade for years to come.

Helping businesses bloom: The United States is uniquely placed to support entrepreneurship in Pakistan because, as President Obama said, "innovation is what America has always been about." In September, we launched the Pakistan Private Investment Initiative, a private equity offering designed to help Pakistan's talented entrepreneurs access the capital they need to expand their businesses and create jobs. In October, we organised the "US-Pakistan Business Opportunities Conference" in London to bring together Pakistani and American businesses and bankers to identify new business opportunities.

Promoting trade and investment: The United States is Pakistan's largest export market. Two-way trade between our countries amounted to almost S6 billion in 2011. The US government wants to expand our trade and investment relationship with Pakistan and so do US investors who are attracted to this country's market of 180 million people.


http://www.brecorder.com/business-a-economy/189/1261765/
Riaz Haq said…
Here's a Bloomberg story titled "Pakistan, Land of Entrepreneurs":

On a warm Sunday morning in November, Arif Habib leaves his posh home near the seafront in southern Karachi and drives across town in a silver Toyota Prado SUV. About half an hour later, he arrives to check up on his latest project: a 2,100-acre residential development at the northern tip of this city of 20 million. He hops out, shakes hands with young company call-center workers who are dressed for a cricket match, and joins them at the edge of the playing field for a traditional Pakistani breakfast of curried chickpeas and semolina pudding. After a quick tour of the construction site, he straps on his leg pads, grabs his bat, and heads onto the field. “The principles of cricket are very effective in business,” says Habib, 59. “The goal is to stay at the wicket, hit the right balls, leave the balls that don’t quite work, and keep an eye on the scoreboard. I feel that my childhood association with cricket has contributed to my success.”

Habib, who started as a stockbroker more than four decades ago, has expanded his Arif Habib Group into a 13-company business that has invested $2 billion in financial services, cement, fertilizer, and steel factories since 2004. His group and a clutch of others have become conglomerates of a kind that went out of fashion in the West but seem suited to the often chaotic conditions in Pakistan. Engro (ENGRO), a maker of fertilizer, has moved into packaged foods and coal mining. Billionaire Mian Muhammad Mansha, one of Pakistan’s richest men, is importing 2,500 milk cows from Australia to start a dairy business after running MCB Bank, Nishat Mills, and D.G. Khan Cement.

These companies have prospered in a country that, since joining the U.S. in the war on terror after Sept. 11, has lost more than 40,000 people to retaliatory bombings by the Taliban. Political violence in Karachi has killed 2,000 Pakistanis this year, and an energy crisis—power outages last as long as 18 hours a day—has led to social unrest. Foreign direct investment declined 24 percent to $244 million in the four months ended Oct. 31, according to the central bank.

At the same time, some 70 million Pakistanis—40 percent of the population—have become middle-class, says Sakib Sherani, chief executive of Macro Economic Insights, a research firm in Islamabad. A boom in agriculture and residential property, as well as jobs in hot sectors such as telecom and media, have helped Pakistanis prosper. “Just go to the malls and see the number of customers who are actually buying in upscale stores and that shows you how robust the demand is,” says Azfer Naseem, head of research for Elixir Securities in Karachi. “Despite the energy crisis, we have growth of 3 percent.”

Sherani of Macro Economic Insights estimates the middle class doubled in size between 2002 and 2012. “Those who understand the difference between the perception of Pakistan and the reality have made a killing,” Habib says. “Foreigners don’t come here, so the field is wide open.” The KSE100, the benchmark index of the Karachi Exchange, has risen elevenfold since mid-2001. Shares in the index are up 43 percent this year alone. Over the past decade, stocks have been buoyed by corporate earnings, which were bolstered in turn by rising consumer spending.
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Today, Habib has 11,000 employees and annual revenue of 100 billion rupees. He plans to expand into commodities trading and warehousing. “I’ve created all my wealth in Pakistan and reinvested all of it here,” says Habib, who drives himself to his cricket matches and is never accompanied by security guards. In 1998, when Pakistan’s share index fell to a record low after the government tested nuclear weapons, Habib bought shares even though “people thought I was mad.”...


http://www.businessweek.com/articles/2012-11-29/pakistan-land-of-entrepreneurs
Riaz Haq said…
Here's Daily Times on Mobilink's planned $1 Billion expansion:

A delegation of VimpelCom informed Prime Minister Raja Pervez Ashraf of plans for further investment of $1 billion in Pakistan for the enhancement of Mobilink’s nationwide mobile network. A delegation comprising senior management from VimpelCom, the parent company of Mobilink, called on the prime minister at the Prime Minister House, on Thursday. The delegation was headed by VimpelCom Group CEO Jo Lunder who apprised the prime minister on VimpelCom’s global operations and the significance of the Pakistani market for VimpelCom’s growth strategy. The prime minister also discussed VimpelCom’s outlook on current operating conditions within Pakistan, and was apprised of Mobilink’s existing investment of over $3.9 billion towards consolidating its position in Pakistan’s telecom sector.

http://www.dailytimes.com.pk/default.asp?page=2012\11\30\story_30-11-2012_pg5_2
Riaz Haq said…
In a recent piece tiled "Pakistan Staring into the Abyss", Pakistani journalist Najam Sethi captures the highly pessimistic mood of the press coverage and books about Pakistan.

http://indiatoday.intoday.in/story/the-pakistani-state-is-staring-at-a-dark-abyss/1/185216.html

Historically, purveyors of books and magazines predicting doom and gloom have mostly been wrong but sold lots of copies.

Matt Ridley, the author of "The Rational Optimist", says that the prophets of doom and gloom from Robert Malthus to Paul Ehrlich(both predicted catastrophe of mass starvation) have always found great acceptance as "sages" in their time but proved to be completely wrong because they discount human resilience and ingenuity.

http://books.google.com/books?id=YoVpW0zJIgYC&printsec=frontcover&dq=rational+optimist+sage&hl=en&sa=X&ei=B6a6UKb4BebgigLV84DoAQ&ved=0CDUQ6AEwAA#v=snippet&q=ehrlich&f=false

The reasons for wide acceptance of pessimists have to do with how the human brain has evolved through the millennia.

It's been established that once the amygdala starts hunting for bad news, it'll mostly find bad news.

Peter Diamandis explains this phenomenon well in his book "Abundance-Why Future is Better Than You Think".

Here's a excerpt from Diamandis's book:

"These are turbulent times. A quick glance at the headlines is enough to set anybody on edge-with endless media stream that has lately become our lives-it's hard to get away from those headlines. Worse, evolution shaped human brain to be acutely aware of all potential dangers...this dire combination has a profound impact on human perception: It literally shuts off our ability to take in good news."

http://books.google.com/books?id=lCifxlN8ZIoC&printsec=frontcover&dq=abundance&hl=en&sa=X&ei=Iqe6UNqeM4zmiwKs5YDYAg&ved=0CDsQ6AEwAQ#v=onepage&q=bad%20news&f=false

In Pakistan's case, the good news continues to be the emergence of a large and growing middle class population and a vibrant mass media and civil society which underpin the country's extraordinary resilience.

Pakistan needs such resilience to complete its difficult ongoing transition to democracy which, the history tells us, has never been easy for any nation.

I believe Pakistan is making good progress toward becoming a prosperous urban middle class democracy.
Riaz Haq said…
Here's a FT story on Pakistan:


The Islamic Republic of Pakistan is not a place where visitors expect to see billboards advertising “Liposuction, Tummy Tuck, Breast Reshaping” for middle-class women, let alone brothels to entertain middle-class men in a red-light district near the main mosque. They are both there in the sprawling commercial city of Lahore.

Nor is Pakistan a country where foreigners wary of Islamic extremism would necessarily envisage a politically correct gender studies centre such as the one at Quaid-i-Azam University in the capital Islamabad – where students, male and female, discuss everything from honour killings to reproductive rights.


To say that Pakistan has an image problem in the west is an understatement. A new Global Terrorism Index published by the Institute for Economics and Peace shows that Pakistan comes second only to Iraq in terms of terrorist violence because of “significant and widespread” attacks, mostly bombings and shootings. (Pakistan’s neighbours, Afghanistan and India, come third and fourth.)

Yet Pakistan is more diverse than outsiders tend to think and the beliefs of its 180m people are more heterogeneous than in many other nations that profess themselves Islamic. Women hold positions of power in politics, business and academia; mystical Muslims worship at Sufi shrines that are anathema to puritan Sunnis in the Saudi mould; and those who might be categorised as Islamic extremists have never won more than 12 per cent of the vote in a general election.
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Democracy in Pakistan – according to one western diplomat who draws comparisons not with South America but with the Middle East – is far from perfect but more developed than it is in Egypt. “At a time when democracy in other parts of the Muslim world is running into problems ... there is something consolidating here against all the odds,” the diplomat says. “Something quite significant is happening here.”

The mere fact of a government finishing its allotted term and facing new elections is important, says another Pakistan-based diplomat. “It’s very hard for the outside world to understand how important that’s going to be ... It changes intangibly the calculations of politicians and the military.”
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Few Pakistanis dispute that the weakness of the economy is a source of fragility, that drastic electricity shortages stoke public anger, or that corruption is worsening further as the election approaches. A few investors, foreign and Pakistani, look back to the decade long military rule of Pervez Musharraf, which ended in 2008, as a kind of golden age of growth and prudent decision-making.

But even Gen Musharraf will wear civilian clothes if – as he hopes – he is able to return from exile to join the political fray. And even business leaders appalled by the state of the economy now hesitate to recommend military intervention in modern Pakistan.


www.ft.com/intl/cms/s/0/fd6b21f2-494b-11e2-9225-00144feab49a.html
Riaz Haq said…
Here's an Express Tribune list of Pakistani companies with over a billion in revenue:

The Billion Dollar Club

1. Pakistan State Oil Company

Revenues: $11.57 billion

Joined club: Before 1986

2. Pak-Arab Refinery

Revenues: $3.00 billion

Joined club: 2000

3. Sui Northern Gas Pipelines

Revenues: $2.52 billion

Joined club: 2004

4. Shell Pakistan

Revenues: $2.38 billion

Joined club: 2000


5. Oil & Gas Development Company

Revenues: $2.23 billion

Joined club: 2005

6. National Refinery

Revenues: $1.97 billion

Joined club: 2005

7. Hub Power Company

Revenues: $1.97 billion

Joined club: 2009



8. Karachi Electric Supply Company

Revenues: $1.84 billion

Joined club: 2008


9. Attock Refinery

Revenues: $1.74 billion

Joined club: 2008


10. Attock Petroleum

Revenues: $1.72 billion

Joined club: 2010


11. Lahore Electric Supply Company

Revenues: $1.49 billion

Joined club: 2006

12. Pakistan Refinery

Revenues: $1.44 billion

Joined club: 2011


13. Sui Southern Gas Company

Revenues: $1.38 billion

Joined club: 2005

14. Pakistan International Airlines

Revenues: $1.36 billion

Joined club: 2005

15. Engro Corporation

Revenues: $1.29 billion

Joined club: 2011


16. Pakistan Telecommunications Company

Revenues: $1.25 billion

Joined club: 2000

17. Kot Addu Power Company

Revenues: $1.14 billion

Joined club: 2012

18. Mobilink

Revenues: $1.11 billion

Joined club: 2006

19. Pakistan Petroleum

Revenues: $1.09 billion

Joined club: 2012

.


http://tribune.com.pk/story/483287/corporate-revenues-the-growth-of-the-billion-dollar-club-in-pakistan/
Riaz Haq said…
Here are some excerpts of a piece titled "How's India Doing (2012)?" as published in The Hindu:

One, the decline in poverty has not been uniform across regions and communities. If in 1982 your parents lived on the banks of the Cooum in Madras or in Dharavi in Bombay, it is likely that today your economic status is better than theirs. But if you are from a Dalit or adivasi family in Madhya Pradesh, Chhattisgarh, Bihar, or Uttar Pradesh, chances are that you are no better off now than your parents were in 1982. Two, the benefits of growth have indeed trickled down, but that is exactly what has happened: it has been just a trickle. The incidence of poverty has declined, but a quarter of the population or around 300-350 million people are still desperately poor. Three, if other basic necessities like shelter, access to clean drinking water and sanitation are included, the picture is much more dismal. Research by R. Jayraj and S. Subramanian shows that severe “multidimensional poverty” afflicted 470 million in 2005-06, not much lower than the estimate of 520 million in 1992-93. Four, in certain critical areas — for instance, malnourishment and maternal mortality — conditions remain terrible. Close to half our children suffer from malnutrition, much the same as 30 years ago.

So if we paint a broader picture, the old sliver of the beneficiaries of India’s growth has only thickened a bit. For the large mass of India’s poor, daily life remains a struggle. There is no doubt India lost a major opportunity in the past three decades.

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The sex ratio has at last begun to see some improvement, though only in the past decade. And the life expectancy of women is now, as it should be, longer than of men. But we are in a far worse situation than in 1982 with respect to the status of the girl child. The sex ratio at birth — the number of girls born for every 1,000 boys born — has declined in recent decades. And the sex ratio of children under six has also worsened. Whether the result of sex-selection at birth, female infanticide, or neglect of the girl child, India has become an awful place for girls.

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The outcome, however, has not been any major improvement in the economic status of the deprived castes. It may be too early to express any definite opinion on the achievements of these parties, but the early optimism that they would position the demand for lower-caste rights as part of a larger movement for justice and equality has faded. These parties have at times turned into movements solely for the advancement of sectional interests, and, worse, have become vehicles of personal aggrandisement.

If these are the changes in four areas that Sen examined in 1982, one also has to recognise that major changes have taken place in other areas.
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For a country that became independent amid gruesome violence on religious lines, communalism has been no stranger. Soon after Sen’s essay, we had the anti-Sikh riots of November 1984. Mass murder was conducted over three days in the capital under the benign gaze of a new Prime Minister. The message was: if you mobilise yourself with force, you can get away with anything. The message was heard, and put into practice in Bhagalpur 1989, Bombay 1993, and Gujarat 2002.

Beyond such open violence, it is the routinisation of communalism in daily life that is new. Mobilisation on communal lines took new forms after the Vishwa Hindu Parishad/Bharatiya Janata Party decided to raise the issue of the Babri Masjid. The rath yatra of 1990, the Congress’s cynical attempt at soft Hindutva, and the destruction of the Babri Masjid completed the post-Independence transformation of India on communal lines. All this has contributed in no small measure to the growth of domestic terrorism. India is tragically now a less tolerant society than what it was in the early 1980s.


http://www.thehindu.com/opinion/op-ed/how-is-india-doing-2012/article4249630.ece
Riaz Haq said…
Here's an excerpt of Shahid Burki's Op Ed in the Express Tribune:

(Prof) Hirschman looked at three possibilities. People could remain loyal to the system that has caused them anxiety and despair. In that case, their hope will be that they can work within the system to reform it and thus improve their own situation in it. This happens in most functioning democracies. People use the opportunities inherent in democratic systems to improve what they receive from politics and economics. The second option is to raise their voice. That can be done by stepping out of the system and entering into a different kind of discourse. This is essentially what was done by the participants in the Arab Spring. The Arab street woke up when the realisation became acute that the autocratic structures in several Arab states did not have the space in which the alienated could raise their voice. They took to the streets and to the public squares and brought about regime change in several countries that had been governed for decades by autocrats.

The third option — of exiting the system — is the most radical of the three that Hirschman considered. This has happened in Syria. Earlier, it happened in Pakistan when the citizens of the eastern wing decided to opt out and create a country of their own. They had tried hard to remain within the Pakistani system as conceived by Mohammad Ali Jinnah but the political structure within West Pakistan could not countenance the idea of political power moving from Islamabad to Dhaka. That would have happened had the results of the 1970 election been allowed to create the government that would have been dominated by East Pakistan’s Awami League. What followed is familiar history.

There can be no denying the fact that the level of people’s alienation with the current economic and political systems in Pakistan has, at this time, reached a level never experienced before. And yet, the citizens have chosen to remain within the developing political order, rather than opt out and try for something new. That the people’s response this time around has been different from those in the Arab world is because of their belief in the political order that is under development. But the process of development has been messy which was to be expected. This brings me to another point that Hirschman developed in his long academic career.

He was of the view that progress is never linear. It does not happen in a smooth way, either with the economy or with the political system. Most systems operate through disequilibria making adjustments as they go along....


http://tribune.com.pk/story/486740/professor-hirschman-and-pakistan
Riaz Haq said…
Here's a New York Times story on economic and income mobility in US:

This geography appears to play a major role in making Atlanta one of the metropolitan areas where it is most difficult for lower-income households to rise into the middle class and beyond, according to a new study that other researchers are calling the most detailed portrait yet of income mobility in the United States.

The study — based on millions of anonymous earnings records and being released this week by a team of top academic economists — is the first with enough data to compare upward mobility across metropolitan areas. These comparisons provide some of the most powerful evidence so far about the factors that seem to drive people’s chances of rising beyond the station of their birth, including education, family structure and the economic layout of metropolitan areas.

Climbing the income ladder occurs less often in the Southeast and industrial Midwest, the data shows, with the odds notably low in Atlanta, Charlotte, Memphis, Raleigh, Indianapolis, Cincinnati and Columbus. By contrast, some of the highest rates occur in the Northeast, Great Plains and West, including in New York, Boston, Salt Lake City, Pittsburgh, Seattle and large swaths of California and Minnesota.

“Where you grow up matters,” said Nathaniel Hendren, a Harvard economist and one of the study’s authors. “There is tremendous variation across the U.S. in the extent to which kids can rise out of poverty.”

That variation does not stem simply from the fact that some areas have higher average incomes: upward mobility rates, Mr. Hendren added, often differ sharply in areas where average income is similar, like Atlanta and Seattle.

The gaps can be stark. On average, fairly poor children in Seattle — those who grew up in the 25th percentile of the national income distribution — do as well financially when they grow up as middle-class children — those who grew up at the 50th percentile — from Atlanta.

Geography mattered much less for well-off children than for middle-class and poor children, according to the results. In an economic echo of Tolstoy’s line about happy families being alike, the chances that affluent children grow up to be affluent are broadly similar across metropolitan areas.
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What they found surprised them, said Raj Chetty, one of the authors and the most recent winner of the John Bates Clark Medal, which the American Economic Association awards to the country’s best academic economist under the age of 40. The researchers concluded that larger tax credits for the poor and higher taxes on the affluent seemed to improve income mobility only slightly. The economists also found only modest or no correlation between mobility and the number of local colleges and their tuition rates or between mobility and the amount of extreme wealth in a region.

But the researchers identified four broad factors that appeared to affect income mobility, including the size and dispersion of the local middle class. All else being equal, upward mobility tended to be higher in metropolitan areas where poor families were more dispersed among mixed-income neighborhoods.

Income mobility was also higher in areas with more two-parent households, better elementary schools and high schools, and more civic engagement, including membership in religious and community groups.


http://www.nytimes.com/2013/07/22/business/in-climbing-income-ladder-location-matters.html?pagewanted=all&_r=0
Riaz Haq said…
A large new study is about to overturn the findings of Moving to Opportunity. Based on the earnings records of millions of families that moved with children, it finds that poor children who grow up in some cities and towns have sharply better odds of escaping poverty than similar poor children elsewhere.

The feelings heard across Baltimore’s recent protests — of being trapped in poverty — seem to be backed up by the new data. Among the nation’s 100 largest counties, the one where children face the worst odds of escaping poverty is the city of Baltimore, the study found.

The city is especially harsh for boys: Low-income boys who grew up there in recent decades make roughly 25 percent less as adults than similar low-income boys who were born in the city and moved as small children to an average place.

Beyond Baltimore, economists say the study offers perhaps the most detailed portrait yet of upward mobility — and the lack of it. The findings suggest that geography does not merely separate rich from poor but also plays a large role in determining which poor children achieve the so-called American dream.

How neighborhoods affect children “has been a quandary with which social science has been grappling for decades,” said David B. Grusky, director of the Center on Poverty and Inequality at Stanford University, who was not involved in the research. “This delivers the most compelling evidence yet that neighborhoods matter in a really big way.”

Raj Chetty, one of the study’s authors, has presented the findings to members of the Obama administration, as well as to Hillary Rodham Clinton and Jeb Bush, both of whom have signaled that mobility will be central themes of their 2016 presidential campaigns. After more than 15 years of mostly mediocre economic growth and rising income inequality, many families say they are frustrated and anxious about trying to get ahead.

“The data shows we can do something about upward mobility,” said Mr. Chetty, a Harvard professor, who conducted the main study along with Nathaniel Hendren, also a Harvard economist. “Every extra year of childhood spent in a better neighborhood seems to matter.”

The places where poor children face the worst odds include some — but not all — of the nation’s largest urban areas, like Atlanta; Chicago; Los Angeles; Milwaukee; Orlando, West Palm Beach and Tampa in Florida; Austin, Tex.; the Bronx; and the parts of Manhattan with low-income neighborhoods.

http://www.nytimes.com/2015/05/04/upshot/an-atlas-of-upward-mobility-shows-paths-out-of-poverty.html?_r=0&abt=0002&abg=0
Riaz Haq said…
A large new study is about to overturn the findings of Moving to Opportunity. Based on the earnings records of millions of families that moved with children, it finds that poor children who grow up in some cities and towns have sharply better odds of escaping poverty than similar poor children elsewhere.
The feelings heard across Baltimore’s recent protests — of being trapped in poverty — seem to be backed up by the new data. Among the nation’s 100 largest counties, the one where children face the worst odds of escaping poverty is the city of Baltimore, the study found.
The city is especially harsh for boys: Low-income boys who grew up there in recent decades make roughly 25 percent less as adults than similar low-income boys who were born in the city and moved as small children to an average place.
Beyond Baltimore, economists say the study offers perhaps the most detailed portrait yet of upward mobility — and the lack of it. The findings suggest that geography does not merely separate rich from poor but also plays a large role in determining which poor children achieve the so-called American dream.
How neighborhoods affect children “has been a quandary with which social science has been grappling for decades,” said David B. Grusky, director of the Center on Poverty and Inequality at Stanford University, who was not involved in the research. “This delivers the most compelling evidence yet that neighborhoods matter in a really big way.”
Raj Chetty, one of the study’s authors, has presented the findings to members of the Obama administration, as well as to Hillary Rodham Clinton and Jeb Bush, both of whom have signaled that mobility will be central themes of their 2016 presidential campaigns. After more than 15 years of mostly mediocre economic growth and rising income inequality, many families say they are frustrated and anxious about trying to get ahead.
“The data shows we can do something about upward mobility,” said Mr. Chetty, a Harvard professor, who conducted the main study along with Nathaniel Hendren, also a Harvard economist. “Every extra year of childhood spent in a better neighborhood seems to matter.”
The places where poor children face the worst odds include some — but not all — of the nation’s largest urban areas, like Atlanta; Chicago; Los Angeles; Milwaukee; Orlando, West Palm Beach and Tampa in Florida; Austin, Tex.; the Bronx; and the parts of Manhattan with low-income neighborhoods.

The places most conducive to upward mobility include large cities — San Francisco, San Diego, Salt Lake City, Las Vegas and Providence, R.I. — and major suburban counties, such as Fairfax, Va.; Bergen, N.J.; Bucks, Pa.; Macomb, Mich.; Worcester, Mass.; and Contra Costa, Calif.
These places tend to share several traits, Mr. Hendren said. They have elementary schools with higher test scores, a higher share of two-parent families, greater levels of involvement in civic and religious groups and more residential integration of affluent, middle-class and poor families.

http://www.nytimes.com/2015/05/04/upshot/an-atlas-of-upward-mobility-shows-paths-out-of-poverty.html
Riaz Haq said…
I see hope for Pakistan in the following part of Natiq's essay "How democracy works in Pakistani villages" describing chances of upward mobility:

There is a high school in my village where about a 1,000 boys and girls from neighboring villages study. We lived nearby and I graduated from there.

The road to the school is a long stretch of dust and potholes. Every time it rains you feel like getting a boat. The children wade through a river of mud to school. The road could have been fixed, but the local political broker did not allow it because my extended family disobeyed his decree and voted for someone else.

I got my undergraduate and master’s degrees through long-distance learning and worked as a mason for 15 years, along with numerous odd jobs. Along with mixing cement, mortar and bricks, I read widely and wrote poems and short stories. Eventually I was hired at a literary institute in Islamabad and published my first collection of poetry in 2010.

https://www.nytimes.com/2018/07/16/opinion/pakistan-elections-villages-military.html
Riaz Haq said…
Pakistan is among the most upwardly mobile nations in the world, according to a new Standard Chartered Bank study titled "Climbing the Prosperity Ladder".

The Standard Chartered study looks into social mobility, financial proficiency and digital savviness among 11,000 emerging affluent consumers in China, Hong Kong, India, Indonesia, Kenya, Malaysia, Nigeria, Pakistan, Singapore, South Korea and the UAE. 34% of Pakistani respondents said their incomes have increased by more than 50% over the last 5 years while 44% said they have seen 10% or more income growth in the last year.

China, India and Pakistan:

Standard Chartered study talks about the "fast-growing economies of China, India and Pakistan are providing abundant opportunities for scaling the social pyramid". Here's an excerpt of the Standard Chartered report:

The fast-growing economies of China, India and Pakistan are providing abundant opportunities for scaling the social pyramid. Leading the way, in both China and India 67% of the emerging affluent are experiencing positive social mobility, while Pakistan is not far behind with 64%. Of the emerging affluent in these countries, India and Pakistan both have more than one in 10 (11%) that are experiencing supercharged social mobility, versus 7% in China. Strong earnings progression is fueling impressive rates of social mobility in all three countries. Many of the socially mobile have benefitted from a salary increase of 50% or more in the last five years – 34% in Pakistan, followed by 30% in India and 26% in China. This gap could widen, with India and Pakistan more optimistic about their future salaries than their Chinese counterparts. Almost half of the socially mobile in Pakistan (48%) and India (46%) predict another earnings increase of 50% or more in the next five years, whereas less than three in 10 (29%) expect the same in China. While the emerging affluent in China are more cautious about salary growth than their counterparts in fast-growing Pakistan and India, workplace remuneration is just one side of the social mobility equation. Education has been considered crucial to improving social standing in China for a long time, but the generational shift towards university access among the socially mobile is larger than any other market: more than nine in 10 have attended university (91%), compared to 34% of their fathers and 29% of their mothers

https://www.riazhaq.com/2018/10/standard-chartered-bank-pakistan-among.html
Riaz Haq said…
Intergenerational Mobility in Pakistan Higher Than in India

Source: World Bank

https://storage.ning.com/topology/rest/1.0/file/get/3688539744?profile=original

https://st1.ning.com/topology/rest/1.0/file/get/3688570908?profile=original

https://openknowledge.worldbank.org/handle/10986/28428
Riaz Haq said…
Pakistan is among top three countries with high upward social mobility across Asia, Africa, and the Middle East region, Standard Chartered Bank Pakistan’s Retail Banking Head Syed Mujtaba Abbas told a group of business journalists on Monday.

Social mobility is the movement of an individual or group from one stratum of society to another over time.

A growing middle class is developing in the country, which has triggered this upward social mobility in the country, Abbas said while sharing the findings of the SCB’s Emerging Affluent Study 2018; ‘Climbing the Prosperity Ladder’.

The emerging affluent comprises consumers who experience impressive earnings growth, and higher levels of education, employment, and homeownership than their parents.

The study, which examines the views of 11,000 people from 11 markets across Asia, Africa and the Middle East, shows Pakistan among top three along with India and China.

Related: Pakistan among six fastest growing economies of 2030

The study focused on people with a monthly income above Rs40,000, who age between 25 and 55 years. Nearly two-thirds of 1,000 Pakistanis surveyed for the study said that they experienced upward social mobility. This is higher than the sample’s overall average, which stands at 59%.

These people are doing better socially and financially as compared to their parents, Abbas said. They have got money to spend, save, and invest and they are driving the economic growth too.

For example, these people bought houses, became managers or owned a business early in their careers as compared to their parents.

Among Pakistani respondents, 44% said their salaries increased by a tenth or more last year and a third of them said their earnings jumped by a half or more in the last five years.

Similarly, nearly 90% of them said they went to a university, a much higher percentage compared to their parents who went to university (66% for fathers and 49% for mothers).

These people say that online banking and digital money management helped them achieve their financial targets.

The study found that 88% respondents owned a house as compared to their parents as the same age (81%). The journalists said that the stats were in contrast to the prevailing trends in the real estate sector, where people with Rs40,000 income level can’t buy a house.

Abbas said the findings reflect the sample of 1,000 and can be expanded for a better and bigger picture since the survey’s finding also show there was still a lot of opportunity for more upward mobility.

https://www.samaa.tv/news/2018/10/pakistan-among-top-three-countries-with-high-upward-mobility/

https://av.sc.com/corp-en/content/docs/SC-Emerging-Affluent-Study-2018-Climbing-the-Prosperity-Ladder.pdf
Riaz Haq said…
Study reveals social mobility booming in Pakistan

https://profit.pakistantoday.com.pk/2018/10/29/study-reveals-social-mobility-booming-in-pakistan/

The Standard Chartered Bank (SCB-Pak) has conducted a study on ‘Emerging Affluent Consumers’ in eleven countries including Pakistan, in which it found that nearly two-thirds or 64 per cent of emerging affluent consumers in Pakistan are experiencing upward social mobility while 11 per cent are enjoying ‘supercharged’ social mobility.

The Emerging Affluent Study 2018 – climbing the prosperity ladder – examines the views of 11,000 emerging affluent consumers- individuals who are earning enough to save and invest – from 11 markets across Asia, Africa and the Middle East.

Commenting on the study, SCB Retail Banking Head Syed Mujtaba Abbas said, “Ambitious consumers are on an upward social trajectory; they are surpassing their parents’ success in education, careers and home ownership. As their ambitions and aspirations grow, they are demanding convenient financial services and digital technology to broaden their access to money management and advance their financial wellbeing. It is an exciting journey where they are not only improving their own lives, but they are also fuelling growth in some of the world’s most exciting markets.”

According to the study, the average figure for social mobility among the emerging affluent consumers across the markets is 59 per cent, and of these 7 per cent are experiencing supercharged social mobility.

Pakistan’s socially mobile consumers, as identified by the study, have had impressive earnings growth, with almost half (44 per cent) enjoying a salary increase of 10 per cent or more in the past year, and more than a third (34 per cent) seeing their earning jump by 50 per cent or more in the past five years.

In Pakistan, the socially mobile people are also better educated and achieving higher levels of employment and homeownership than their parents. As many as 89 per cent went to universities, compared to 66 per cent of their fathers and less than half (49 per cent) of their mothers, while 83 per cent are in a management position or running their own businesses compared to 65 per cent of their fathers and 28 per cent of their mothers. Similarly, as many as 88 per cent of the socially mobile people own their own home, compared to 81 per cent of their parents at the same age.

Levels of optimism among the emerging affluent in Pakistan are even higher than reality, with 79 per cent believing they are in a better financial position than their parents compared to the 64 per cent in the study that are actually socially mobile.

More than two-thirds (70 per cent) of the emerging affluent in Pakistan say their familiarity with digital tools have been vital to their personal success, while 73 per cent say online banking makes them feel that they have more control over their money and investments, and 67 per cent say digital money management has helped them get closer to achieving their financial goals.

Pakistan’s emerging affluent is comfortable going online for financial advice, with the majority (60 per cent) saying they would invest in financial products online if an on-demand adviser was available. Risk is not a problem for the emerging affluent if strong rewards are possible 58 per cent would accept a high level of risk for a high level of return when investing their money in online financial products.
Riaz Haq said…
INTERGENERATIONAL ECONOMIC MOBILITY: THE CASE OF NORTH-
WESTERN PAKISTAN
Ansa Javed Khan1, Sajjad Ahmad Jan2, Jawad Rahim Afridi3*, Arshia Hashmi4, Muhammad Azeem Ahmed5 1Assistant Director, P&D, Bacha Khan University, Charsadda, Pakistan; 2Assistant Professor, Department of Economics, University of Peshawar, Peshawar, Pakistan; 3*Lecturer, Department of Economics, Sarhad University of Science & IT, Peshawar, Pakistan; 4Assistant Professor, The University of Faisalabad, Department of Management Studies, Faisalabad, Pakistan; 5Associate Professor, Barani Institute of Sciences, Pakistan.
Email: 1*director_pnd@bkuc.edu.pk, 2sajjadahmadjan@uop.edu.pk, 3*jrafridi67@gmail.com, 4arshia.hashim@tuf.edu.pk, 5azeem@baraniinstitute.edu.pk
Article History: Received on 19th June 2021, Revised on 26th June 2021, Published on 29th June 2021


https://www.sciencegate.app/document/10.18510/hssr.2021.93141


Access to Education and Intergenerational Economic Mobility
The following table 1 shows the change in educational status which has taken place between the parents and children’s generations for the overall sample as well as for the sub-groups (Majority and Minority Tribes). The absolute numbers (outside parentheses) and the percentage (within parentheses) in different cells of the table show the people who are illiterate or at different levels of education. The table on one hand shows the intergenerational mobility of people up and down the education ladder and on the other hand reveals the wide and persistent educational gap between the majority and minority tribes. The table shows that 26 % of the respondents in the kids’ generation do not have any education versus 46 % in the parents’ generation. The results affirm the government’s claims and the common perception that, on average, more people have become literate through time and therefore the people in the children’s generation are more likely to be educated than their parent's generation. Further, the college and university graduates in the children’s generation outnumber the school graduates while school graduates outnumber the higher two educational categories in the parents’ generation as most of the students in past used to drop out at both primary or high school levels and couldn’t manage to get into a college or university for higher studies.

The aggregate results for the whole sample are actually driven by the majority tribes as it shows identical trends from the parents’ generation to the children’s generation in all educational. The majority tribe has succeeded in decreasing the number of illiterates from 33% in the parents’ generation to 11% in the children’s generation. College and university graduates (total of 60%) outnumber the school graduates and the illiterate (total of 40%) in the children’s generation as compared to the parents’ generation in the majority tribe where the former is 26% and the latter is 73%. This indicates a visible upward movement of the educational ladder by the members of the majority tribe. The situation of education and literacy in the minority tribe is deplorable if the comparison is either made on basis of children’s and parents’ generations or if the educational attainment levels of the minority and majority tribes are compared. The illiterates outnumber all the other educational categories as in sharp contrast to the educational attainment levels of the majority tribe. The data further reveals that no or only a negligible improvement in the educational status of the people belonging to the minority tribe has taken place between the children’s and parents’ generations. This affirms our presumption that in the North-Western parts of Pakistan, the tribal affiliation of a person determines his or her access to education. The ease of access to education then further transforms into economic mobility or immobility of the people.

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