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Gender Inequality and Poverty
Gender Inequality and Poverty
Gender Inequality and Poverty
https://doi.org/10.1007/s13132-023-01527-y
Abstract
Poverty and gender inequality are among the major issues in developing coun-
tries that can hinder their economic progress and human development. Hence, this
research is designed to investigate the impact of financial development on gender
imbalance and poverty in the context of Pakistan controlling a number of other vari-
ables using the Bayer and Hanck cointegration method and the ARDL bound test on
the data from 1985 to 2022. The results of the study indicated cointegration among
the variables. The long-run estimates unfolded that financial development decreases
the gender imbalance (gender inequality) in the context of Pakistan; however, it
boosts poverty levels in the country. In the context of control variables, we found
that education is helpful in decreasing gender inequality in Pakistan while economic
growth boosts gender inequality. Moreover, economic growth is a reliable tool to
decrease the poverty level in Pakistan, and reducing gender inequality can help to
alleviate poverty levels in the country. Surprisingly, education is mounting poverty
level in Pakistan indicating that the education system in Pakistan is not providing
quality education to poor people. Based on these results, the study suggests that gov-
ernment can focus on developing a strategic plan to decrease gender inequality and
poverty by introducing suitable policies in the context of the financial sector, educa-
tion, and economic growth.
Introduction
The poverty has been the dilemma for developed and developing nations in past and
current decades. Poverty is reflection of miserable economic situations for countries,
lifestyle of inhabitants, and difference among rich, poor, and middle-class families
in different territories of the World. The scholars like Zheleznyakov and Tarasov.
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(2016) in their study explained that poverty is also name of the rapid decrease in
middle-class families into poor class not only developing economies but also in
developed states as well. They further explained that like United States of America
(USA), Mainland of China, Japan, and Germany also come into this domain. The
vulnerability of poverty in MENA countries is also an example which is investigated
by Abu-Ismail (2021). Nowadays, many scholars and economic policymakers are
trying to intensify the efforts and suggest policies for poverty reduction in different
time spans and regions with different findings.
According to Michálek and Výbošťok (2019), there are many reasons behind increas-
ing level of poverty in the countries which include unequal distribution of economic
growth and its effects. It was also endorsed in the current study of Balasubramanian et al.
(2023). They further reported in their research that increasing levels of inequalities are
the main cause for poverty with bad impacts on countries’ economic growth and their
population well-beings. In the world economies, the topic of economic growth and pov-
erty has remained the part of vast discussions among the scholars (Wang, 2023).
There is no proper definition of poverty because it has a variety of dimensions in
literature. But some scholars like Brady (2018) defined poverty is basically shortage
of resources which are required for fulfilling the basic needs of routine life. Simi-
larly, some scholars like Chatterjee (2012) explained in their research work that pov-
erty is combination of complex phenomenon having variety of dimensions. They
further stated on the basis of single definition it is not applicable to measure the
basis of poverty in societies and regions. It is also mentioned in their work that there
might be logical reasoning behind occurrence and reduction of poverty including
equal division of money, economic growth, and social capital, and its productivity,
social sector development, and infrastructure. This definition of poverty is also in
line with the current study of Dayan (2022). Moreover, Zheleznyakov and Tarasov
(2016) in context of Russia explained that high level of private property, unequal
distribution of money and income, and consumption savings among population and
economic as well as social potential of that particular area leads towards poverty. To
that end, the level and reasons of poverty may differ according to countries states
and their policies.
The nexus of economic growth and poverty has attained the attentions of scholars
from the last few decades. However, the majority of research is done on this nexus
in panel studies and scant literature is available in economic development studies
on this nexus in form of single-country studies as well. In the MPI (Global Multi-
dimensional Poverty Index), it is stated that the people with insufficient monitory
resources, high level of unemployment, poor health and education, lack of housing
facilities, empowerment, and insecure environment comes under the category of
poverty (Alkire et al., 2018), and it was endorsed in the current literature of Ullah
and Chishti (2023). Alkire et al. (2018) further stated that these determinants of pov-
erty are associated with economic growth.
Mahembe et al. (2019), in their panel study for 82 developing economies with
the data coverage of 1981–2013 by using the statistical technique of VECM (Vec-
tor Error Correction Model), explored a two-way relationship among the vari-
ables of poverty and economic growth. Similarly, Pérez-Moreno (2016), in 52
developing states with the data set ranging from 1970 to 1998 found one-way
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The basic reason behind conducting this research work to empirically examine the
effect of financial development on economic growth, gender imbalance, and poverty
in case of Pakistan. The previous study of Kendo et al. (2008) in Cameroon is evi-
dent that financial level developments act as a stimulator to enhance the growth of
the country. It also causes to increase the income level of males as well as females.
They further stated that financial level developments in the countries play a sig-
nificant role in poverty reduction. Moreover, nonlinear impact of financial develop-
ments was observed on gender imbalance in case of Cameroon. The relationships of
underlying study are presented below.
Many attempts have been made by scholars to empirical examine the causality inter-
action between the linkage of financial development and savings but a very little
effort by researchers has been made to statistically explore the nexus of financial
development and poverty. During the past decade, the study of Odhiambo (2010) in
the context of Kenya investigated the causality between the nexus of financial devel-
opment and poverty reduction. For empirical purpose, the authors used the data
ranging from 1968 to 2006 and they applied tri-variate causality method for causal
interaction. The findings of their study revealed the existence of distinct causal
relationship from financial development to poverty reduction. The study of Uddin
et al. (2014), in Bangladesh by using data from 1975 to 2011 for empirical findings
with the help of ARDL methods for cointegration measurement, investigated that
financial development acts as stimulator for productive investments. Furthermore,
long-run bidirectional causal interaction between financial development, economic
growth, and poverty was investigated. Moreover, the study of Hicham (2018) in
Algeria by using data for the years 1970 to 2017 by applying the statistical method
of Zivot and Andrew. Their findings revealed the financial level development cannot
play a role in poverty reduction. Furthermore, it was confirmed in their results that
the economic growth of the country is pro poor.
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Similarly, in the panel study of Fowowe and Abidoye (2013) for African coun-
tries on the nexus of financial level development and poverty reduction by using the
technique of generalized method of moment which is commonly termed as GMM,
it was found that financial development in African countries does not affect the pov-
erty reduction in that specific regions. They further explained that no effect of finan-
cial development on poverty reduction is due to poor management and distribution
of financial measures. The research of Jalilian and Kirkpatrick (2005) found that
after reaching a threshold level of economic development the financial level devel-
opments play a role for contribution in poverty reduction through growth increasing
effect. They also plaid the relationship of financial development and its effect in pov-
erty reduction for developing countries of the world.
There is also another school of thought on the relationship between financial develop-
ment and poverty reduction. The studies of Beck et al. (2007) and Shahbaz and Islam
(2011) pointed out that the directionality causality among financial development and
poverty is not mean that poverty reduction is due to financial level developments. They
further stated equal distribution of financial resources at population level can play a vital
role for reducing poverty. Later on, it was endorsed by Inoue and Hamori (2012). The
findings of the nexus of financial development and poverty are inconsistent and incon-
clusive and still need to be explored in the context of a single country. Due to mixed
results, we explored this nexus in Pakistan for different insights.
The reduction of gender imbalance and women empowerment is part of MDGs (Mil-
lennium Development Goals) set by UN (United Nations). The gender difference is
problem for all developing and developed nations among the world. The scholars
like Pervaiz et al. (2011) mentioned in their research work that gender imbalance is
issue for all countries in the world which is not justifiable on the basis of ethical and
philosophical point of views. The gender imbalance has negative outcomes for eco-
nomic growth which is directly associated with poverty.
According to Niimi (2009), gender imbalance exists in societies due to inequali-
ties in education, health, decision-making, earning opportunities, employment,
occupational hierarchies, and bargaining authority as well as power in households.
And according to Jayachandran (2015), the abovementioned reasons of inequalities
usually occur in developing countries. The most standing social issues in current era
which are capturing every nation in the world are poverty and gender imbalance or
inequality (Dormekpor, 2015). In the study of Lawanson and Umar (2019), it was
claimed in their study that poverty and gender effects badly on economic growth.
Furthermore, by applying data of 1980–2022 with the help of ARDL approach in
context of Nigeria, they sorted the data from World Development Indicator and
National Bureau of Statistics. Their empirical findings justified that gender imbal-
ance (in education and employment) in the short and long run has causal effects on
growth with economic loses and enhancement in poverty.
Similarly, scholars like Egbulonu and Eleonu (2018) in the context of Nigeria
conducted a research on economic growth, gender inequality, and their impact on
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human capital for the time span of 1990–2016. They collected data for empirical
observations from different resources including ILO (International Labor Organiza-
tion), UNESCO (United Nations Educational, Scientific and Cultural Organization),
and World Bank data from National accounts. They further used the Esteve Vol-
tar model for statistical observation. It was depicted in their findings that there is
male dominancy in educational enrollment and employment which is attached with
growth. They suggested the government should focus on the issue of gender imbal-
ance in education, employment, and equal opportunities to retain sustainable devel-
opment which is associated with poverty reduction.
The study of Bastos et al. (2009) in Portugal is evident for poverty of women. By
using household data of 1995–2009, it was found in their research work that unequal
opportunities for employment and educational activities are contributing a lot in vul-
nerable poverty in country particularly for women. The work of Wiepking ans Maas
(2005) explored the effects of gender imbalance and the risk of promoting poverty in
twenty-two industrialized states of the world. They observed that in majority of the
countries the women are going to be poorer as compared to men. They explained the
reason of low participation of women in labor market and lack of educational oppor-
tunities. The study of Gaddis (2019) is also supporting this evidence in panel of
African countries. Furthermore, the impact of gender inequality has also observed in
different past and current studies as well. The research work of Cabeza-García et al.
(2018) found the negative impact of gender imbalance upon growth. Some scholars
like Bandiera and Natraj (2013) investigated that inequality in gender is best for pro-
moting economic growth. The results on the nexus of growth and gender inequality
are with mixed findings. Furthermore, it is stated in the empirical study of Lawanson
and Umar (2019) that poverty imbalance has direct and indirect effects on the eco-
nomic growth in form of inequalities between health, education, and employment.
They further stated that poor health, education, and inequalities in employment lead
towards poverty with bad impact on growth. To that end, we explored this relation-
ship of poverty and gender imbalance in context of Pakistan for different insights.
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findings that economic growth does not play a leading role in reduction of poverty
in the mentioned region. In time series, study of Nindi and Odhiambo (2015), in
the context of Swaziland for the time spanning of 1980–2011, found that there is no
causal interaction from growth to poverty in the short run. They further investigated
that poverty reduction has Granger causality effect on economic growth in the short
run. Moreover, the scholars like Nuruddeen and Ibrahim (2014), in the context of
Nigeria, found a unidirectional linkage from gross domestic product to poverty. They
concluded that increasing trends of economic growth in Nigeria cause to increase
in the poverty level. They used data ranging from years 2000 to 2012. The nega-
tive relationship between growth and poverty was also observed by some authors
like Zaman et al. (2011). The above literature is showing mixed results in different
time spans and regions in form of panel and single-country studies. Oloyede (2014)
mentioned in their research work that poverty is now issue for entire world which is
disturbing the nations with different levels. To that end, we tried to explore this rela-
tionship for Pakistan separately that how the government of Pakistan is committed
to tackle with poverty by keeping in mind the economic growth.
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situation with bad impact on economy of the country as compared to other nations. And
there is existence of gender gap among male and female in Pakistan gender as inequal-
ity is big issue of the societies in Pakistan (Pervaiz et al., 2011).
Moreover, in recent work of Bukhari et al. (2019), it was narrated that there is more
dominancy of males in the society as compared to women. They further explained the
school of thought of different societies of Pakistan as most of people link the working
of women as a dishonor for their families. This school of thought only provides support
to women if they are engaged in family chores only. And as gender inequality in many
perspectives leads towards poverty with bad impacts on the economy to that end, we
tend to fill this gap in case of Pakistan for different insights, as gender imbalance and
poverty are the main issues for Pakistan in the current era. Ahmed and Hyder (2006)
explained in their research work that women in Pakistan are facing the vulnerable issues
of unemployment, health education and labor market. Furthermore, it was suggested in
the empirical study of Bukhari et al. (2019) that gender equality can play a vital role in
poverty reduction in Pakistan to that end, we tried to explore this combined nexus of
gender inequality and poverty in the context of Pakistan in the presence of economic
growth and financial development.
A plethora of literature is available on the nexus of economic growth and poverty
and gender imbalance and poverty in previous studies. Similarly, scant literature is
also available on the relationship of financial development and poverty reduction
with different findings and scenarios. The results are different for different econo-
mies on this nexus. For example, Jalilian and Kirkpatrick (2005) stated in their find-
ings that financial development plays a vital role in poverty reduction, while some
scholars like Dhrifi (2015) pointed out that financial development is causing pov-
erty in low-income countries. The findings are inconsistent and still there is need
to observe the impact of financial development on poverty and gender imbalance in
case of Pakistan for suggesting some fruitful policies for the issues which Pakistan
is facing due to poverty and gender imbalance. As per authors best knowledge, this
is novel study to explore this complex nexus as a combine study and their causal
effects in case of Pakistan.
The main motive for conducting this research work is the empirical and statistical
investigations between dynamic link and nexus among financial developments, gen-
der inequality, country growth, and poverty. Furthermore, what is causal interaction
between the study variables which are named and explained in Table 1 of this man-
uscript will be explained. The data for study variables were gathered from World
Bank database and Human development reports. The data is ranging from 1985 to
2018 for empirical investigations. All variables, their proxies, and data source are
mentioned in Table 1 of the study.
Moreover, as concerned with econometric approach, there is existence of dif-
ferent sort of statistical techniques in the literature for observing the cointegration
and short- and long-run dynamics among the study variables. These approaches of
integration have been introduced by scholars including Phillips and Hansen (1990);
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Table 1 Variables and definitions of variables
Variables Proxy Data source
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Gender inequality LNGEN It deals gender inequalities in three important aspects of human Human Development Reports retrievable from www.undp.org
development which includes reproductive health (RH), which is
calculated with the help of maternal mortalities ratios & and the
birth rates of adolescent; empowerment, calculated by proportions
of parliamentarians seats captured by women and proportion of
adult women or females and men aged 25 years & older with at
least some secondary educational level; and economical standings,
uttered as labor market contribution and considered by labor force
participations rate of (female & male) populations aged fifteen
years or older than 15 years
Poverty LNPOV The variable of poverty contains ratio at $3.20/day is percentage World Development Indicators
of the population living on less than $3.20/day at 2011 GPI or https://databank.worldbank.org
(Global Price Index). As a consequence of the revision in PPP
exchange rates, poverty rate for individuals
Financial develop- LNFD It deals with the ratios of private credits to gross domestic product World Development Indicators (https://databank.worldbank.org)
ment or GDP
GDP LNY It deals with the value of (GDP) gross domestic product at (constant World Development Indicators
2010 US dollars) https://databank.worldbank.org
Education LNEDU This index is linked and considered component of the (HDI) or Human Development Reports retrievable from www.undp.org
Human Development Index available each year by the UNDP).
Moreover, in the presence of the GDP & Life Expectancy Index, it
is constructive to measure the learning and educational attain-
ments, GDP per capita/capita and levels for life expectancy of
different nations of the globe
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Table 1 (continued)
Variables Proxy Data source
Survival LNSURV This sort of sub index contains a summary of the difference among TCdata360, World bank
the health of gender including men and women by considering Retrievable by https://tcdata360.worldbank.org
2 indicators. 1st is the amount of all ratios by sex at the time
of birth, and it has purpose to detain the occurrence of missing
women, widespread in multiple states and countries with a brawny
preference. Secondly, we used the gaps among the level of life
expectancies of men and women. This measure provides a total
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Engle and Granger (1987); and Johansen and Juselius (1990a, b). But as some short-
comings exist to that reasons, these methods are failed to satisfy the researches for
appropriate findings. These cointegration tests are also not suitable for dealing with
structural breaks. These breaks often happen in time series data in different time
spans. Due to these reasons, we applied autoregressive distributed lag model for
checking the integration and long- and short-term strength of association among
nexus of constructs which are used in this study. The introduction for the method
of ARDL was proposed by Pesaran et al. (2001). This method of measurement is
considered also popular among researchers for finding integration among the varia-
bles and dealing with structural breaks accordingly. Some benefits of ARDL method
which are making it noteworthy are given as in following lines.
The ARDL technique is important as it tells that variable is co integrated at level
of 1st difference or 1(0) and 1(1) level. Moreover, the plus points of ARDL were
also described by researchers like Harris and Sollis (2003). They stated the positiv-
ity of ARDL that this method is particularly helpful for robust results without con-
siderations of sample size. This is also useful for adjustments of lags in the model
by carrying solid estimations of t statistics for the models which are long run in
nature. The ARDL method useful when working with small sample sizes because
it permits trustworthy inference despite having only a few data points to work with.
Since statistics on gender disparity, poverty, and economic growth in Pakistan are
readily available, we were able to use the ARDL method effectively. The ARDL
method’s strength lies in its ability to capture the interplay between the short- and
long-term dynamics of a given set of variables. It enables us to examine the short-
and long-term impacts of shifting gender roles and economic growth on poverty.
This all-encompassing method reveals subtler connections between variables. This
model also provides researcher the giddiness for pursuing the dynamics of UECM.
The UECM is named as unrestricted error correction model which reflects a signifi-
cant position for long-run equilibriums link with short term. During this linkage, the
data for the long run is put together. This method of measurement is also helpful for
time series data because it provides guidelines for proper correlation as well as find-
ing endogeneity (Pesaran et al., 2001).
The relationship between incorporated variable has been tested through cointegra-
tion and causality methods. First, we have examined the stationary of time series data
through unit root tests. The study employed both structural and conventional root test
to detect the issue of stationary. After unit root test, the order of integration has been
determined through using the Bayer and Hanck cointegration test to investigate the
cointegration among constructs. The cointegration results have been tested through the
ARDL bound test approach. Likewise, after testing co integration, the ARDL method
has been used to determine the long-run dynamics and for confirmation of ARDL
results; DOLS estimator is employed. Finally, the direction of causality among variable
is determined through Toda and Yamamoto approach.
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The steps of ARDL technique which are commonly followed by researchers are dis-
cussed below:
(I) At first step, the unit root test determined by Zivot and Andrews was applied.
This test is best for dealing with structural breaks which are present in the
time series of the data.
(II) Choosing of optimal lag length for model specification.
(III) Applying bound testing for empirical findings.
(IV) For observing cointegration among the set of variables, Johansen cointegra-
tion technique was also applied.
(V) For determining long- and short-run relationships, the ARDL test was also
applied.
(VI) Applied CUSUM and CUSUM tests for estimations of square.
(VII) Applied vector error correction model commonly known as VECM for deter-
mining the causal interaction among the variables.
Moreover, before using the autoregressive distributed lag model in our study for
empirical investigation, it is necessary to check the data and its assumptions first to exe-
cute the process. The unit root tests are considered for checking the stationary level of
the data. Similarly, the bound test is reflection of the not stationary (series) at 1(2) lev-
els. According to Ouattara (2004) if these series are stationary at 2nd difference, then
F values will be unreliable as determined by ARDL. They also mentioned that cointe-
grations should be occurred at the 1st difference level. Furthermore, as concerned with
the unit root tests, it was recommended in the research of Shahbaz et al. (2013) that the
unit root tests determined by Zivot and Andrews (2002) are most appropriate for deal-
ing with structural breaks in series of data. On the basis of these recommendations, we
applied this unit root test for accuracy and reliability of our data. While the other unit
root tests of Kwiatkowski et al. (1992) and Phillips and Perron (1988) are not support-
ive to deal with structural breaks.
The study estimates the relationship between incorporated variable based on follow-
ing two models:
LNGENt = 𝜆o + 𝜆1 LNFDt + 𝜆2 LNYt + 𝜆3 LNEDUt +
(1)
𝜆4 LNSURVt + 𝜆5 LNPARTt + 𝜆6 LNPOVt + 𝜇t
The process of cointegration has been performed after examining the orders of
integrations. This cointegration order has been estimated by employing PP and
ADF unit root tests. The PP and ADF test by default linger on the null hypothesis
on the level of non-stationarity. Based on PP and ADF test, the null hypothesis
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remains rejected if the p-value remains lesser than 0.05 and t-value remains above
than 1.96. However, both PP and ADF tests are presumed to provide biased
results due to their potential limitation of structural break (Ahmed et al., 2020a,
b, 2021). Therefore, to control this issue, we have also used conventional unit root
tests as anticipated by Zivot and Andrews (1992), which is used to determine the
structural breaks and orders of integrations.
Cointegration Analysis
The literate posits various approaches to estimates the cointegration to examine the
long-run equilibrium relationship. Likewise, Engle and Granger (1987) offered a
residual-based approach to estimate the cointegration. The seminal work of Engle and
Granger (1987) set forth the foundation for various other co integration tests such as
Johansen (1988) cointegration tests, Johansen and Juselius (1990a, b) cointegration
tests, and Boswijk (1994) and Banerjee et al. (1998) ECM-related tests.
The cointegration test provides biased results when there is small sampling
size, and additionally, various types of the cointegrations tests provide different
results and no one remains exceptional for providing complete reliable estimates
(Ahmed & Wang, 2019). The mixed results estimated through different cointe-
gration tests often create chaos concerning the selection of a valid test of coin-
tegration. Therefore, to avoid this confusion, in line with most recent literature,
we have considered the cointegration methods and procedures proclaimed by
scholars like Bayer and Hanck (2013) and ARDL bound test. The method offered
by Bayer and Hanck (2013) combines the values for probability of four different
cointegration methods namely Johansen (1991) and Banerjee et al. (1998). As per
the combined co integration methods, there is rejection of null hypothesis while
the fisher statistics exceed from the critical value of Bayer and Hanck (2013).
The study validates the outcomes of Bayer and Hanck tests with the support of
ARDL bound tests. Moreover, ARDL approach has various advantages as com-
pared to other prevailing co integration techniques. The ARDL approach is appli-
cable to small sample size and provides reliable estimates (Pesaran et al., 2001).
This technique is best suited to apply when the all variables are integrated in
many sorts of orders, for example, 1(0) or 1(1) or when they are showing integra-
tions at fractional level. However, the approach does not remain applicable when
variable remain integrated as 1(2) (Ahmed et al., 2019). Furthermore, the ARDL
approach remains robust to address the endogeneity and autocorrelation problem
(Ahmed et al., 2020a, b). The adopted ARDL based on unrestricted error correla-
tion models are stated as:
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p p
∑ ∑
Δ(LNGEN)t = 𝛼o + 𝛼1k Δ(LNGEN)t−k + 𝛼2k Δ(LNFD)t−k +
k=1 k=0
p p
∑ ∑
𝛼3k Δ(LNY)t−k + 𝛼4k Δ(LNEDU)t−k +
k=0 k=0
p p
(3)
∑ ∑
𝛼5k Δ(LNSURV)t−k + 𝛼6k Δ(LNPART)t−k +
k=0 k=0
p
∑
𝛼7k Δ(LNPOV)t−k + 𝛼1 (LNGEN)t−1 + 𝛼2 (LNFD)t−1 +
k=0
𝛼3 (LNY)t−1 + 𝛼4 (LNEDU)t−1 + 𝛼5 (LNSURV)t−1 +
𝛼6 (LNPART)t−1 + 𝛼7 (LNPOV)t−1 + 𝜀t
p p
∑ ∑
Δ(LNPOV)t = 𝛼o + 𝛼1k Δ(LNPOV)t−k + 𝛼2k Δ(LNFD)t−k
k=1 k=0
p p p
∑ ∑ ∑
+ 𝛼3k Δ(LNY)t−k + 𝛼4k Δ(LNEDU)t−k + 𝛼5k Δ(LNSURV)t−k
k=0 k=0 k=0
p p
∑ ∑
+ 𝛼6k Δ(LNPART)t−k + 𝛼7k Δ(LNGEN)t−k
k=0 k=0
+ 𝛼1 (LNPOV)t−1 + 𝛼2 (LNFD)t−1 + 𝛼3 (LNY)t−1
+ 𝛼4 (LNEDU)t−1 + 𝛼5 (LNSURV)t−1
+ 𝛼6 (LNPART)t−1 + 𝛼7 (LNGEN)t−1 + 𝜀t
(4)
In the abovementioned models, lag length is denoted by p, while 𝜀t represents
residual terms, and ∆ is signifying for 1st difference operator. The very 1st seg-
ment of this equation with the symbol of summation (∑) represents short run, while
in the 2nd segment it is determining long-run associations. The F-values as com-
pared to critical values suggested by Narayan (2005) are determining the cointe-
grations among the defined variables. While in 3rd equation when there is case as
the computed F-values go beyond or exceed the upper critical bound (UCB), than
null hypothesis of no cointegrations ( H0 ∶ α1 = α2 = α3 = α4 = α5 = α6 = α7 = 0)
is leading towards rejection and the 2nd alternative hypothesis of cointegrations
( H1 ∶ α1 ≠ α2 ≠ α3 ≠ α4 ≠ α5 ≠ α6 ≠ α7 ≠ 0) is considered to be accepted. In com-
parison, when values of F are less than lower critical bounds (LCB), it is a symbol
of existence of no cointegrations among the variables.
In addition, the incidence of cointegration cannot be determined, if the values of
F-statistics are ranging in between the upper and lower values. We have used the criti-
cal values as per suggestions by Narayan (2005) as well as Pesaran et al. (2001). The
values usually known as critical values proposed by Narayan (2005) are based on thirty
to eighty observations and these stay suitable when the size of the sample is small.
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The study estimates Eq. (4) after testing the cointegration for examining the short-
and long-run elasticity. However, the main concern of the study remains to establish
the long-run relation; therefore, only long-run results are being reported. The study
also conducted various robust tests to ensure that estimated model fulfil the underlying
assumptions of serial-wise correlations, heteroskedasticities, and incorrect functional
forms. This study is in line with Brown et al. (1975), who also performed CUSUM and
CUSUMsq to confirm the parameters stability. We have validated the long-run findings
of ARDL through employing DOLS estimators. The DOLS estimators remain robust
to detect the endogeneity problem in the study models and fix the bias resulted due to
small sample sizes. The DOLS estimators are applicable in the case of integrated vari-
ables such as (1(0) and 1(1)) (Masih & Masih, 2000).
After cointegration and robust tests, the study estimates the Granger non-causality
measurements and techniques suggested by Toda and Yamamoto (1995). Moreover,
these tests for non-causality provide reliable estimates as compared to other prevail-
ing causality tests. The test remains applicable if the variables are 1(0), 1(1), or 1(2),
showing no cointegration or even if showing integration in form of arbitrary orders.
It is also a characteristic of this approach, that, it is cohesive with ARDL approach
because its input information contains lag lengths and maximum orders for integra-
tions (Shahzad et al., 2017).
Additionally, Toda and Yamamoto technique asphyxiates the potential bias
annexed with these tests (unit root) and cointegration. The estimation of this specific
test (Toda and Yamamoto) does not involve pre-testing of equilibrium which is long
run in nature for the rapport or relation between variables (Zhang, 2011).
The descriptive statistics are represented in Table 2 of the study variables. It is men-
tioned that gender inequality has a mean value of 4.8720 with smaller or minimum
level value of 4.785 and a maximum value of 5.2327. Poverty has a mean value
of 4.0791 while financial development (FD) has an average value of 9.2387 with a
minimum value of 9.2466 and a maximum of 9.5931.
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Table 3 portrays the findings executed from the unit root methods. The results
from the technique of PP and ADF methods indicate that the series used in the study
possess a unit root at level; moreover, at their very 1st difference, all of the variables
are stationary. Therefore, it is possible to move towards cointegration analysis using
different methods.
Moving towards the other step of our study analysis, we employed techniques of
ZA tests because previous methods ignore structural breaks in the data during sta-
tionarity investigation. Whereas, the ZA unit root method not only captures station-
ary levels but also reports one structural break in data. Again, the findings in Table 4
illustrated that series is integrated at 1(1) with one break in every variable.
Next, we employed the Bayer and Hanck (BH) method for checking co integra-
tion. The BH method is applicable when variables have a uniform integration level,
i.e., stationary level of 1(1) and our data meets this criterion. We inspected coin-
tegration in two models and the findings given in Table 5 illustrate that in model
1 where gender inequality is dependent variable, both statistics generated by the
BH test are significant. Hence, there is cointegration in this model. Similarly, in the
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* shows 1% significance
second model, both statistics are significant and we can conclude cointegration in
the model.
Next, we verified these results using the bound testing method in Table 6. This
method can handle series integrated at different levels and small sample sizes; thus,
this method is also very reliable to check the co integration. Results reveal that
F-statistics for both models are significant; hence, we found evidence of cointegra-
tion in the analyzed models.
Next, we computed the long-run estimates in Table 7 and Table 8. In Table 7, the
outcomes support that financial development (FD) play an important role for reduc-
ing gender inequality in the long run. This is a very positive sign because it implies
that the financial sector is providing funding that is used by women as well to raise
their income level and their status in the society of a developing country like Paki-
stan. Thus, support from the financial sector can raise the status of females in soci-
ety and may help to reduce their financial dependence on male. This in turn can help
to reduce gender inequality in society. Our research work has contradictions with
the results of De Haan et al. (2021) in the panel of 84 countries. They concluded
that financial development has no direct impact on poverty but it promotes inequal-
ity. But the findings of our manuscript are quite similar with the research work of
(LNGEN/LNFD, LNY, LNEDU, 9.6155* 2.8189 [ 0.1139] 0.7723 [0.4023] 0.2699 [0.6075]
LNSURV, LNPART, LNPOV)
(LNPOV/LNFD, LNY,LNEDU, 36.3912* 0.4647 [0.5126] 0.0047 [0.9465] 0.5826 [0.6321]
LNSURV, LNPART, LNGEN)
Critical values LCB 1(0) LCB 1(0)
1% 3.976 5.691
5% 2.794 4.148
10% 2.334 3.515
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ARDL DOLS
Variables Coefficient t-statistics Prob. Variables Coefficient t-statistics Prob.
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ARDL DOLS
Variables Coefficient t-statistics Prob Variables Coefficient t-statistics Prob
inequality is the name of gap among male and female employment opportunities,
and discrimination among earning, managerial positions, education, and politi-
cal representations. Shahbaz et al. (2015) in their research work explained that
beyond the increase in economic growth the gender and income inequality in
under developed countries cannot be disregarded.
Next, education in the long run reduces gender inequality and this finding
matches our expectations because education raises awareness, and educated peo-
ple can also know about the situation of developed nations where mostly both
genders are treated equally. Also, education empowers women to start jobs and
improve their earning, which can also be a reason for the reduction in gender
inequality because less financial dependence on females can support gender ine-
quality. This finding is consistent under DOLS as well. Survival is insignificant in
both methods implying that it does not affect gender inequality in Pakistan. How-
ever, participation in both models boosts gender inequality in Pakistan. Surpris-
ingly, even the increase in poverty will have a negative effect on gender inequality
implying that showing that poverty does not increase gender inequality in Paki-
stan. Thus, these results indicate that government can decrease gender inequality
through education and financial development only.
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Besides, lagged ECT is 0.26 with the right sign implying that convergence takes
more than 3 years. Also, the model is stable as indicated by the diagnostic tests’
results and the plots of CUSUM and CUSUMSQ (Figs. 1 and 2).
In Table 8, the long-run results of our second model are presented. From these
results, it is clear that financial development in Pakistan is increasing the pov-
erty level. This finding matches the outcomes of Dhrifi (2015) who concluded
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Education is not effective in reducing the poverty level in Pakistan. This may
be due to the fact that poor people have less access to quality education in Paki-
stan. Thus, rich people enjoy quality education which helps them to become richer
while the poor people do not get opportunities for education. Thus, education is not
decreasing the poverty level in the society in Pakistan. Survival is insignificant in the
second model as well while participation is increasing poverty rather than reducing
it. However, an increase in gender inequality will boost the poverty level implying
that Pakistan may reduce poverty by decreasing gender inequality.
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Furthermore, the results are consistent in both ARDL and DOLS. Apart from
this, all diagnostic tests indicate that the model is stable and the plots of CUSUM
and CUSUMSQ are also stable (Figs. 3 and 4).
The causal analysis is conducted using the Toda and Yamamoto (TY) test in
Table 9. The main results for model with poverty indicate that financial develop-
ment, education, and gender inequality Granger cause poverty. Likewise, other
variables also Granger cause poverty. In the model with gender inequality, it is
indicated that education, income, participation, and survival Granger cause gen-
der inequality.
The main motive for conducting this piece of research is to determine the impact
of financial development on gender inequality and poverty in case of Pakistan.
The relationship among the study variables is investigated by using the autore-
gressive distributed lag model in the presence of unit root tests and vector error
correction model to find cointegration, to deal with structural breaks and to
observe causal interaction among the study variables. The data was collected
from different sources which are highlighted in Table 1 of this study. The data
is ranging from year 1985 to 2022 for empirical observations. It is depicted in
the major results of this work that there exists cointegration among the variables.
Additionally, our results are revealing that financial development can act as a
stimulator to reduce poverty in the country.
Furthermore, the strength of association between poverty to economic growth is
negatively associated which reflects an increase in the poverty level in Pakistan and
affects economic growth negatively. Similarly, the positive and bidirectional rela-
tionship among the variables of gender imbalance and poverty has also been inves-
tigated in our results. It means that both poverty and gender inequality have causal
interaction with each other. Furthermore, the two-way causal relationship between
economic growth and financial development is also observed. Moreover, it is bitter
reality that the lack of education and gender imbalance is stepping forward day by
day in Pakistan which is causing to increase in the level of poverty in the country
(Batul et al., 2019). Pakistan is harshly facing the troubles of gender inequality, poor
health, and educational facilities, and increasing trends of poverty in the country are
leading towards vulnerable situation. This vulnerability will create harmful circum-
stances on the growth of the nation state.
As concerned with the policy recommendation, Pakistan like all other Muslim states
has discrimination among genders. Particularly, female community is victimized at a
larger level. It is time for Pakistan to revise the policies to demolish gender imbalance
for sustainable economic growth. The government of Pakistan should find the solution
to overcome the severe issue of gender inequality. It is the responsibility of the gov-
ernment of Pakistan to provide equal employments opportunities to expose the hidden
talents of women so that they can contribute well to the country’s economic growth.
Similarly, policies are suggested by authors for equal treatment of women during work-
ing hours, representation and promotion of women in public and private sectors, and
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Journal of the Knowledge Economy
promotion of women empowerment so that they can raise their voice against any vio-
lence in their rights, ensure equal opportunities for health and education for both men
and women, and formulate the regulation and protection against honor killing, domestic
violence, and abuse, and the programs and sessions should be conducted at a commu-
nity level for the development of women. Meanwhile, the policymakers of Pakistan are
entreated and requested for making surety of better health, education, harmony, love,
and respect among the genders. The subject of gender studies must be part of the edu-
cational system in Pakistan to avoid gender imbalance.
Similarly, our findings depict that financial development participates positively
for increasing poverty in Pakistan, which is contributing a lot to increasing sense of
deprivation among the inhabitants of Pakistan with miserable conditions. Moreo-
ver, poor community is mostly exploited by a society which is very pathetic. So,
proper allocation of funds without any discrimination can reduce the poverty level.
The government of Pakistan is working on multiple projects regarding financial
development in the country with the collaboration of different foreign-funded pro-
jects. Particularly, China is investing a lot in boosting financial development of Paki-
stan under the umbrella of China-Pakistan Economic Corridor. So, it should be the
responsibility of concerned authorities to reduce the gender gap by providing equal
employment opportunities for poor and rich to overcome the severe issue of poverty.
Open Access This article is licensed under a Creative Commons Attribution 4.0 International License,
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ses/by/4.0/.
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