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Globalization is an umbrella term that describes an ongoing process of establishing various personal, cultural and business relationships with other countries. In this regard, this study tries to measure the impact of globalization on poverty alleviation in Pakistan from 1980 to 2010. Foreign direct investment, trade openness and remittances have been used as independent variables to explain the degree of globalization; while head count ratio has been used as a proxy for the dependent variable of poverty. Three methods of time series econometrics - unit root test, cointegration analysis and causality analysis - have been used to analyze the data. The study findings suggest that globalization has a favourable impact on poverty alleviation in Pakistan: 1 per cent increase in trade reduces poverty by 3.08 per cent; 1 per cent increase in remittances reduces poverty by 7.10 per cent; and 1 per cent increase in FDI reduces poverty by 1.59 per cent. Empirical evidence shows that remittances have a grater impact on poverty alleviation than FDI and trade openness. The study recommends that information and technology systems should be improved to make Pakistan an attractive destination for foreign investors.
Keywords: globalization; poverty; FDI; trade openness; remittances; co-integration
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