Contribution of Spatial Concentration in Exaggerating Inequalities: Across Various Urban Regions of Pakistan

Industrial agglomeration and inequalities are much of the concerns in recent literature. Pakistan, being a developing country, is also restricted by resource availability to treat all regions equally with respect to investment and development. As a result, regions with growing agglomeration experience higher income levels relative to other regions. To investigate this empirically this study employed propensity score matching (PSM) across urban regions in Pakistan using Labour Force Survey data 2017-18. For agglomeration regional herfindhal indices were estimated and regions with above average index value along with having positive index growth were considered as treated or agglomerated regions. The positive and significant coefficient of regions with treatment signifies that regions with agglomeration were found to have higher relatively income. Hence introducing industrial concentration in untreated regions would be effective in reducing inequalities rather tackling them by reducing agglomeration in agglomerated regions.