I= DISTRIBUTIVE EFFECTS OF GOVERNMENT EXPENDITURES AND TAXES: A CASE STUDY OF PAKISTAN, 1979, 1986-87,1992-93, 2001-02
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Title of Thesis
DISTRIBUTIVE EFFECTS OF GOVERNMENT EXPENDITURES AND TAXES: A CASE STUDY OF PAKISTAN, 1979, 1986-87,1992-93, 2001-02

Author(s)
Muhammad Ilyas
Institute/University/Department Details
International Islamic University /International Institute of Islamic Economics
Session
2004
Subject
Economics
Number of Pages
279
Keywords (Extracted from title, table of contents and abstract of thesis)
pakistan, nnp, expenditures, taxes, fiscal index, zakah, ushr, government expenditures, government financial accounts, rural areas , urban areas

Abstract
This study analyzes the distributive effects of government expenditures and taxes in the urban-rural areas of Pakistan in 1979, 1986-87, 1992-93 and 2001-02. Government financial accounts seldom provide proper identification of the beneficiary or payer. Therefore, it has been tried to use the best-correlated data available to find out an appropriate, though rough, imputation. Such data are in various forms, like expenditures of households on education and medical care, agriculture income of households, consumption pattern of taxed commodities and so on. In both urban-rural areas the values of average expenditures show decreasing behaviour through lowest to highest income group (pro-poor). However urban average expenditure rates have remained more pro-poor than that of in rural areas in 1979, 1986-87, 1992093 and 2001-02.

By the same token, the tax burden has been measured by the average tax rates. The patterns of tax incidence have shown that they are pro-rich in nature. However, behaviour of rural average tax rates has been proven more-pro-rich than that of its urban counterpart in 1979, 1986-87, 1992-93 and 2001-02. Statistical test has shown that pre-and post fiscal incomes are significantly different in urban-rural areas at the I percent level in all four years. Moreover, it is found that there exist a positive relation between the extent of equality achieved through the government expenditures and taxes, and the extend of corresponding decrease in the poverty level in urban-rural areas in all four years.

The zakah and ushr system in Pakistan has been proven pro-poor in urban-rural areas in 1986-87, 1992-93 and 2001-02. In 1986-87 zakah and ushr system was more pro-poor in urban areas than that of the rural areas. Whereas, in 1992-93 and 2001-02 the effects of zakah and ushr on the distribution of income were larger in rural areas than that of the urban areas. A formal statistical test has shown that the differences between pre-fiscal and post-zakah and ushr distributions were found to be statistically significant at the I percent level in both urban and rural areas in each year.

Disaggregation has shown that the distributive affects of government expenditures, especially, education and health expenditures were smaller for rural areas than that of the urban areas. On the other hand, pro-rich behaviour in the tax structure of urban-rural areas, in general, is due to larger portion of indirect taxes relative to the direct taxes in the total tax collections. Moreover, regressivity in the rural tax structures in all four years have been attributed to the negligible amount of direct taxes paid by the high income groups and heavier burden of indirect taxes on the low income groups. Hence it has been suggested that policy makers should be conscious about the composition, quality and magnitude of government expenditures, especially, education and health expenditures allocated to urban-rural areas. While, the tax structure should have larger portion of direct taxes rather than indirect taxes to achieve the objective of fair distribution of income in urban-rural areas of Pakistan.

Download Full Thesis
3291.05 KB
S. No. Chapter Title of the Chapters Page Size (KB)
1 0 Contents
148.85 KB
2 1 Introduction 1
69.73 KB
  1.1 Background 2
  1.2 Objective And Hypotheses 4
  1.3 Organization Of The Study 5
3 2 Literature Review 8
212.17 KB
  2.1 A Review Of Some Relevant Foreign Case Studies 8
  2.2 A Review Of Relevant Studies In Case Of Pakistan 15
4 3 Methodology And Data Set 26
249.02 KB
  3.1 Methods Used In This Study 26
  3.2 Lorenz And Concentration Curves 43
  3.3 The Data Set 45
  3.4 Scope And Limitations Of This Study 48
5 4 Empirical Analysis 51
354.16 KB
  4.1 Division Of Households, NNP, Expenditures And Taxes Between Urban-Rural Areas Of Pakistan 52
  4.2 Distribution Of Households And NNP (Income Base) Along The Income Groups In Urban-Rural Areas 54
  4.3 Distribution Of Government Expenditures And Taxes Across The Income Group In Urban-Rural Areas Of Pakistan 55
  4.4 Fiscal Incidence In Urban-Rural Areas Of Pakistan 62
6 5 Regression Analysis 79
230.15 KB
  5.1 Regressions For Urban Areas 80
  5.2 Regressions For Rural Areas 86
  5.3 Urban Versus Rural Regressions 92
7 6 Pre And Post Fiscal Incidence: Lorenz Curves And Gini Ratios 100
202.55 KB
  6.1 Pre And Post Fiscal Incidence In Urban Areas 101
  6.2 Pre And Post Fiscal Incidence In Rural Areas 102
  6.3 Urban Versus Rural – Pre And Post Fiscal Incidence Significance Tests 106
8 7 Effects Of Zakah And Ushr On The Distribution Of Income 120
451.5 KB
  7.1 Regressions For Urban Areas (With-Without) Zakah-Ushr 122
  7.2 Regressions For Rural Areas (With-Without) Zakah-Ushr 128
  7.3 Urban Versus Rural Regression (With-Without) Zakah-Ushr 133
  7.4 Effects Of Zakah-Ushr On (Urban-Rural) Gini Ratios And Lorenz Curves 139
  7.5 Significance Tests 145
9 8 Disaggregated Analysis Of Expenditures And Taxes, And Policy Implications 156
232.12 KB
  8.1 A Disaggregated Analysis For Expenditures 156
  8.2 A Disaggregated Analysis For Taxes 164
  8.3 Policy Implications 169
10 9 Summary And Conclusions 175
95.1 KB
11 10 Some Concepts And Terminologies 184
1192.52 KB
  10.1 Distribution Of NNP, Expenditures And Taxes Between Urban-Rural Areas. 214
  10.2 Distributors For Government Expenditures 246
  10.3 Distributors For Taxes 251
  10.4 Number Of Households, Imputed Expenditures And Taxes, Pre-And Post-Fiscal Incomes By Income Groups. 256
  10.5 Data On Zakah And Ushr 261
  10.5 Bibliography 270