Multidimensional Inclusive Growth and Determinants in Pakistan: Do Foreign Remittances and Institutional Quality Matter?

Abstract

Inclusive growth (IG) aims to create decent work and economic opportunities for all, including marginalized populations, which aligns with the SDG-8 objective of promoting sustained, inclusive and sustainable economic growth. Many studies measure IG through a single dimension, overlooking its multidimensional economic, social, health, and sustainability aspects. This study contributes by constructing a multidimensional IG index and using the four dimensions and 15 indicators, which cover all the aspects of IG. Moreover, the study investigates the determinants of IG with a particular focus on foreign remittances and institutional quality in Pakistan from 1996 to 2021. The bootstrap auto regressive distributive lag (BARDL), fully modified ordinary least-squares and dynamic ordinary least-squares techniques are employed for estimating the results. The long-run estimates reveal that remittances, institutional quality, trade openness and financial development showed positive effects on IG. While inflation, population growth and unemployment exert a negative impact on IG. Moreover, BARDL short-run estimates reveal that remittances, institutional quality and financial development have a positive effect on IG. In contrast, population growth and trade openness have a negative impact on IG. The policy advice is that the government develop strategies to optimize the inflow of international remittances and enhance the institutional quality to promote the IG in Pakistan.

Keywords

Foreign remittances Institutional quality Inclusive growth Bootstrap ARDL Structural Break Pakistan.

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