Examining the Relationship between Literacy Rate and Poverty in Pakistan

Abstract

Education plays an important role to pave way towards economic growth. Investment in education enhances the living standards and it is necessary for economic growth and social well-being of a society. This study forecasted the education status and its impact on economic growth by taking data from 1971 to 2016 in Pakistan. Secondary data were taken from International Finance Statistics and World Bank Development Indicators. The variables included in the research were poverty, Education status, and Economic growth. Time series analysis was carried out on the data. The empirical methodology adopted for this purpose includes the use of Augmented Dickey Fuller test, WALD test, Johanson cointegration test, and VECM test. The study found long-run relationship between economic growth and the education status when poverty serves as dependent variable measuring economic growth in case of Pakistan. This showed that education does affect economic growth in the long run but not in short run. The interdependency between the variables suggested that policies should be formulated that would have a long lasting positive impact on the education status of the population and the continuity of the policies to achieve its objectives is more essential.