Public Goods, Productivity, and Economic Inequality

This chapter explores the link between public goods provisioning and income inequality. There is considerable evidence to support the significant positive relationship between public spending on key goods and services, household productivity, and economic growth. This chapter shows how state failures in public goods provisioning perpetuate and exacerbate income inequality. The link between poor access to public goods by low-income households and an entrenchment and deepening of income inequality is operationalized through effects on household acquisition of human capital and subsequent productivity levels. Undertaking a broad literature review, the chapter examines the link between human capital, productivity and growth, and the role of public goods in human capital acquisition and subsequent earning capacities. Next, the chapter delves specifically into the case of Pakistan and establishes that there is minimal socioeconomic mobility across generations. Here, lack of programmatic provisioning to a range of public goods adversely affects human capital and productivity levels, widening the gap between marginalized and more connected households. The latter are able to use patronage networks to maintain a base level of public goods provisioning, with the rich simply privately providing. In either case, marginalized, vulnerable, and poor populations are left further behind. Hence, the country witnesses a widening gap in access to public goods and services leading to inequalities in productivity levels and ultimately in well-being. In the end, the chapter also discusses possible solutions and ways forward.