industrial policy, its spatial aspects and cluster development in ...

the gap between the leading and the
lagging districts is increasing with the
passage of time, which should worry
policy makers who are interested in
bringing about spatial equality.
Poverty Impacts of Public
Investments and Causes of
Industry Agglomerations
The econometric evidence shows that
poverty coexists with illiteracy of
household heads and lack of household
asset ownership. Therefore, the
government emphasis on human
capital accumulation and social and
physical infrastructure development as
tools for poverty reduction makes
sense. Policies that seek universal
access to education by increasing the
quantity and quality of schools and
colleges seem to have a strong power
to reduce poverty. While current
attention to investment in social
infrastructure is clearly appropriate,
policy inattention to spatial inequality
in income is very costly, especially in
more deprived districts. Our empirical
analysis of the evolution of poverty on
the basis of high quality district level
data on post-primary education and
hospital infrastructure index indicates
that increased public sector
investments on education and health
infrastructure lead to a sharp decline
in poverty in all but highly unequal
districts where these investments are
not associated with a decline in
poverty. Policies that encourage
investment in social infrastructure by
also promoting more spatial equality
in the distribution of income may yield
higher returns.
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The econometric results further show
a strong negative association between
road density and poverty incidence.
The magnitude of fall in poverty due to
road density is even higher than the
effect of investment on post-primary
school system and hospitals. We also
find that the long run effects of road
density on poverty are far greater than
the short run effects. We conclude that
income equality matters as far as
public investment on infrastructural
projects is concerned. The long run
poverty alleviation potential of
investment on roads almost doubles
when we move from high income
inequality districts to low income
inequality districts. Therefore, we
reiterate that pubic policies that seek
more regional equality in incomes are
far more desirable for pro poor growth
policies.
This study has also examined the
nature of geographic concentration of
manufacturing industries in Pakistan
by using the Ellison and Glaeser
concentration index. While there is
little doubt that increasing returns to
scale associated with agglomeration
externalities do exist at a wider scale in
Pakistan, it is much more difficult to
identify factors that cause industry
agglomeration. We have also explored
how geographic concentration of
manufacturing industries emerges
from the dynamic process overtime
and what is the nature of
agglomeration economies. Our
findings show that agglomeration of