Drivers of Regional Development of Pakistan : Dynamic Spatial Panel Data Analysis (1990-2020)

This study analyses the critical role of core infrastructure in the regional development of Pakistan. The Dynamic Fixed-Effect Spatial Durbin Model has been used for the provincial data during 1991 to 2020. The spatial dependence parameter is positive and statistically highly significant, signaling positive spatial spillovers and reflecting positive network externalities as results of the economic cohesion and regional networking. The results revealed that the net short-run marginal effect of investing in human capital development is higher than the total long-run effects. The positive long run total effects are offset by negative indirect effects that signals factor out-mobility due to the relative difference in the human-capital. Moreover, investing in the private capital stock impacting the long-run development is at the cost of short-term losses (total effects are negative). Likewise, the infrastructure investment is also subject to short-run trade-offs, as the size of parameters of the total effects (negative) is smaller than the total long-run effects (positive). Therefore, investing in infrastructure is only beneficial for regional economic development in the long run