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 socialinclusion 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. JEL Classification: D62, I38, L52, R13 Keywords: Agglomeration, CPEC, Social Inclusion, Factor Analysis, Data Envelopment Analysis, Efficiency