Multiple Inequalities

This chapter starts with the premise that inequalities of various types and stripes are big constraints on long-term economic growth. The case against acute inequalities is made out not on moral or ethical grounds. Rather case against inequality is discussed purely from economic and growth angles. The concentration of wealth and income creates dead capital and restricts income circulation in the society having negative implications for aggregate demand and economic growth. Various kinds of inequalities and their negative implications are discussed. The inequalities of income, gender, and inter-generational mobility, being major constraints on economic growth, are discussed in bit more detail. An analysis of World Bank’s intergenerational data of selected countries confirms that intergenerational mobility in Pakistan is very restricted compared to selected comparator countries. A comparison of Palma ratios, based on longitudinal data from World Inequality Database (WID), is drawn for various countries. The trend analysis of Palma ratios suggests that both growth and income inequalities can be taken care of simultaneously. The experience of Malaysia and South Korea confirms the said proposition. In terms of Palma ratios, Pakistan does not fare bad compared to its regional comparators but persistence of same figure over a period of 50 years suggests that the factors behind income and wealth inequality in Pakistan are structural in nature. Low Intergenerational mobility and low female labor force participation also confirm the structural nature of inequality in Pakistan. More progressive taxation, introduction of new taxes like wealth tax, redistribution of productive assets, enhancing participation of women in labor force are discussed as few peaceful options for reducing inequalities and igniting economic growth.