Literacy, Poverty and Trade Openness in Pakistan: An Empirical Investigation

Purpose: Education plays a vital role in improving the standard of living of the masses by providing them with better job opportunities and future earnings. This study has attempted to investigate the impact of the literacy rate on poverty in Pakistan. Methodology: This study is based on secondary data and has employed the Johansen Cointegration and VECM technique for empirical investigation. Headcount ratio is a dependent variable, employed as a proxy for poverty. In the present study, explanatory variables are literacy rate, trade openness, FDI and inflation rate. Findings: The empirical findings from the study show that literacy rate and trade openness show a negative relationship with poverty in Pakistan. However, inflation shows a positive relationship with poverty. Policy Implications: The study suggests that policymakers should initiate suitable measures to improve the education system in Pakistan. There is a dire need of increasing the enrolment rate at the primary level and special check on the drop-out ratio in public schools.