The Spatial Effects of Road Infrastructure on Employment in Pakistan: Quantifying the Role of Complementary Factors

Abstract

This study uses district-level panel data to measure the spatial effects of road infrastructure on employment while accounting for institutional quality, rural connectivity, and labour productivity in Pakistan. The estimates based on the spatial regression model show that road density positively and significantly impacts employment. A 10 percent increase in road infrastructure would lead to a 4.3 percent increase in employment directly and indirectly—the spillover effects of road infrastructure help optimise the benefits of public investment in infrastructure projects. Empirical results reveal that institutional framework and access to rural areas complement road infrastructure in channelising road development’s employment effects. These findings suggest a call for a comprehensive policy to reap the potential benefits of road infrastructure. Apart from developing the road network, the government should also develop complementary factors, namely institutional reforms and rural connectivity.