Economics of Social Protection in Framework of Fiscal Policy: A Case Study of Pakistan

Abstract

This dissertation covers the economics of social protection in the framework of fiscal policy in a couple of ways. It investigates the international and Pakistan scenario with respect to social protection to cure poverty. Social protection is a phenomenon that contains different policies and programs to mitigate poverty and vulnerability. The study contains different research questions like, how are structural and institutional features integrally related to the provision of social protection? Is it significant to mitigate poverty in the respective regions? It is also reviewed that social assistance, insurance and promotion of social rights represent social protection, where the objectives are to: protect, prevent, promote and transform the societies into economic power. Social protection is necessary to obtain better socio-economic status for which institutions of the country need to work efficiently. To explain the need and importance of fiscal space for social protection channels, five different emerging economies which are considered as a part of this dissertation. The study suggests an increase in tax revenue, reallocation of public spending, and debt reduction to generate fiscal space. A substantial level of government spending is evaluated for social protection programs in a global prospect. Rank and regression analysis is done to develop the results. A World Welfare Index (WWI) is generated by accommodating different social welfare indicators to measure the impact of social protection expenditures. Rank position of each country differs from rank to rank which indicate that these does not emphasize equally, on structural, institutional and welfare indicators. In the regression analysis, most of the structural and institutional variables are significant and justify the economic theory. Robustness check also proves the regression results. It is concluded that structural, institutional and welfare features are helpful to get a comprehensive view of the concerned economies. At a disaggregate level, rank and regression analysis was used across all the four provinces of Pakistan. The results of provincial analysis were similar to results as of the international level, which means that no province stands equally at high or low level in all the three ranks. Regression analysis proved that structural and institutional features are significant for provision of social protection and welfare standards in Pakistan. Finally, the role of social protection (education, health, social transfers and subsidies) is evaluated in the process of poverty reduction. An Autoregressive Distributed Lag (ARDL) model was used to identify the short-run and long-run relation between the social protection and poverty and was found that the outreach of social protection via government expenditures on education, foreign aid and zakat play a significant role in poverty reduction in Pakistan.