The Effects of Agglomeration on Socio-economic Outcomes: A district level panel study of Punjab

Abstract

This paper examines the variation of agglomeration across districts over time in Punjab and analyses the effects of agglomeration on socio-economic outcomes in terms of social inclusion and efficiency of firms at the district level in Punjab. Earlier studies in this regard faced multiple problems since they used cross-sectional data. To bridge the gap, a newly constructed panel data from CMI is used. Factor Analysis technique is 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) is used to calculate district-wise firm efficiency. The study argues that agglomeration is a logical consequence of China Pakistan Economic Corridor (CPEC) through an increase in the economic activity in various districts of the province. The results show that district agglomeration has a positive effect on the 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 CPEC can be a game changer for the economy of Pakistan especially Punjab since it has significant potential positive effects on the economy of Punjab.