Spatial Inequality and Geographic Concentration of Manufacturing Industries in Pakistan

This paper examines the nature of spatial inequality and causes of geographic concentration of manufacturing industries in Pakistan. The mapping of districts as spatial units suggests that firms are not uniformly distributed across space. They are mostly clustered in districts where there is large market, high road density and pooling of educated and skilled labor force. We use plant level data from CMI supplemented by external information to analyze geographic concentration of manufacturing plants. In general, our results suggest that strong and moderate concentration of manufacturing industries is widespread and that there is a declining trend in the dynamic industrial concentration. The econometric results confirm that increase in population size, higher road density, and pooling of technically trained workers promote geographic concentration of manufacturing industries. Moreover, localization economies (or within-industry externalities) are much more important in Pakistan than inter-industry learning or technological spillovers. Industries that offer highest local scale economies are also the most agglomerated. This paper also shows that productivity growth from 1995-96 to 2005-06 has remained stagnant in all industries, except food, beverage and tobacco industry.