Pakistan Institute of Development Economics


Effect of Agglomeration on Socio-economic Outcomes: A District Level Panel Study of Punjab

This paper examines the variation of agglomeration across districts over time in Punjab and analyses effects of agglomeration on socioeconomic outcomes in terms of social inclusion and efficiency of firms at district level in Punjab. Earlier studies in this regard faced multiple problems since they used cross-sectional data. To bridge the gap, we used newly constructed panel data from CMI. Principal Component Analysis/Factor Analysis technique has been used to analyse social-inclusion variable, in addition to some other control variables as well. Data Envelopment Analysis (DEA) with bootstrap technique (performed in R) has been used to calculate district wise firm efficiency. DEA technique ensures reliability of results since it is non-parametric in nature and is therefore free from specification bias. The results show that district agglomeration has positive effect on average district wise efficiency of firms and has a positive statistically significant relation with social-inclusion. Interesting implications arise from results, setting up clusters in urbanised rather than highly urbanised areas under China Pakistan Economic Corridor (CPEC)can be a game changer for the economy of Pakistan especially Punjab since it has significant potential positive effects on the economy of the Punjab.



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