The Impact of governance on agricultural value-added inequality nexus in Pakistan

Abstract

Abstract This study empirically investigates the intricate relationship between governance (GOV), agricultural value-added (AVA), and income inequality in Pakistan from 1984 to 2018. The study employed a time series threshold regression estimates technique to investigate non-linear dynamics among the variables. The results indicate that the relationship between GOV and income inequality is not linear and dependent on the level of GOV. The empirical results show that GOV improvements reduce income inequality at lower threshold levels. However, at a higher threshold level, GOV improvements can lead to an increase in income inequality. These findings suggest that policy efforts to decrease income disparity in Pakistan should consider both the state of GOV and supplemental measures to reduce inequality successfully. The study further employed the Atkinson and Palam ratio other than the Gini coefficient for reliability. The diagnostic tests show that the model is well-specified and robust. The results further provide some crucial guidelines for reducing income inequality in Pakistan.