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


  • Uzma Tabassum PhD Scholar and Research Assistant, Applied Economics Research Centre (AERC), University of Karachi
  • Shaista Alam Senior Research Economist, Applied Economics Research Centre (AERC), University of Karachi
  • Ambreen Fatima Senior Research Economist, Applied Economics Research Centre (AERC), University of Karachi



Inequality, Agglomeration, Propensity Score Matching, Urban Regions, Herfindhal Index


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.


Abid A. Burki& Mushtaq A. Khan (2011). "Agglomeration Economies and their Effects on Technical Inefficiency of Manufacturing Firms: Evidence from Pakistan", International Growth Centre Working paper

Aiginger, K. &Rossi-Hansberg, E. (2006). “Specialization and Concentration: a note on theory and evidence” Empirica 33, pp. 255–266.

Aiginger, K. (1999) “Do Industrial Structures Converge? A survey on the empirical literature on specialization and concentration of industries”, WIFO-Working papers.

Aiginger, K., Davies, D. (2004). “Industrial Specialization and Geographical Concentration; Two sides of the same coin?” Journal of Applied Economics 7(2), pp. 231-248.

Austin P.C. (2011) "A tutorial and case study in propensity score analysis: An application to estimating the effect of in-hospital smoking cessation counseling on mortality". Multivariate Behavioral Research, 46 pp. 119–151.

Azhar, A. & Adil, S. (2016). " Effect of Agglomeration on Socio-Economic Outcomes: A District Level Panel study of Punjab" The Pakistan Development Review Papers and Proceedings: The 32nd Conference of the Pakistan Society of Development Economists, December 13 - 15, 2016, pp. 155-170

Burki, A. A & Khan, A. M. (2012). "Agglomeration Economies and their Effects on Technical Inefficiency of Manufacturing Firms: Evidence from Pakistan", International Growth Centre Working paper

Chaudhry, A., & Haroon, M. (2015). "The Economic Impact of New Firms in Punjab". The LahoreJournal of Economics 20, pp. 143–182

Cochran, W. G., & Rubin D. B. (1973). “Controlling Bias in Observational Studies: A Review,” Sankhya, The Indian Journal of Statistics, 35(4), pp.417–446.

Cochrane, W., and S. Chambers (1965). “The Planning of Observational Studies of Human Populations,” Journal of the Royal Statistical Society, Series A, 128, pp. 234–266.

Daytyan, K. (2016). "Interrelation among Economic Growth, Income Inequality, and Fiscal Performance: Evidence from Anglo-Saxon Countries," Review of Public Economics, vol 217(2), pp 37-66.

Dehejia, R. H., and S. Wahba (2002), “Propensity Score Matching Methods for Nonexperimental Causal Studies,” Review of Economics and Statistics, 84, pp. 151–161.

Duranton, G., Puga, D. (2004). “Micro-foundations of urban agglomeration economies.” In: Henderson, J.V., Thisse, J.-F. (Eds.), Handbook of Urban and Regional Economics, Vol. 4, North-Holland, Amsterdam, pp. 2063-117.

Ellison, G., E. Glaeser (1997). "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach", Journal of Political Economy, 105, pp. 889–927.

Fambon, S. (2017) "The Determinants of Inequality and Income Gap between Urban and Rural Areas in Cameroon: Evidence from the ECAM3 Household Survey". Advances in Economics and Business, 5(7), pp.394 - 410.

Fan, C., and A. Scott. (2003). Industrial Agglomeration and Development: A Survey of Spatial Economic Issues in East Asia and a Statistical Analysis of Chinese Regions. Economic Geography 79 (3), pp. 295–319.

Flury, B. K., Riedwyl, H. (1986) "Standard distance in univariate and multivariate analysis". The American Statistician. 40 pp. 249–251.

Gardiner, B., Martin, R., & Tyler, P. (2010). "Does spatial agglomeration increase national growth? Some evidence from Europe". Journal of EconomicGeography, 11(6), pp. 979-1006

Geppert, K., Marti, G & Axel, W. (2008). "Economic Growth of Agglomerations and Geographic Concentration of Industries: Evidence for West Germany", Regional Studies, 42(3), pp. 413-421.

Glaeser, E., H. Kallal, J. Sheinkman, and A. Schleifer (1992), “Growth in Cities”, Journal of Political Economy, 100, pp. 1126-1152.

Heckman, J., Ichimura, H. & Todd, P. (1997), "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Program", Review of Economic Studies, 64(4), pp. 605-654.

Heckman, J., Ichimura, H., Smith, J. & Todd, P. (1998), "Characterization of Selection Bias Using Experimental Data", Economelrica, 66(5), pp. 1017–98.

Heckman, J., Robert, L & Smith, J. (1999)."The economics and econometrics of active labor market programs". In Handbook of labor economics, 3(1), pp. 1865–209.

Henderson, V., A. Kuncoro, and M. Turner (1995), “Industrial Development in Cities”, Journal of Political Economy, 103, pp.1067-1152.

Imbens, G. (2004): “Nonparametric Estimation of Average Treatment Effects under Exogeneity: A Review,” The Review of Economics and Statistics, 86(1), pp. 4–29.

Jamal, H (2006). "Does inequality matter for poverty reduction? Evidence from Pakistan's poverty trends" The Pakistan Development Review 45(3), pp. 439-459

Khan, S., and E. Tamer (2010), “Irregular Identification, Support Conditions and Inverse Weight Estimation,” Econometrica, 78 (6), pp. 2021-2042.

Kim, S. (2008) "Spatial Inequality and Economic Development: Theories, Facts, and Policies". Commission on Growth and Development, working paper No.16

Krugman, P. (1991) "Geography and Trade" Cambridge: M.I.T. Press,

Marshall, A. (1890) “Principles of Economics” London.

Maurel, F., B. Sedillot (1999) "A Measure of the Geographic Concentration in French Manufacturing Industries", Regional Science and Urban Economics, 29, pp. 575–604.

Midelfart, K. H. (2004) "Does agglomeration explain regional income inequalities?" Norwegian School of Economics and Business Administration and CEPR

Naseer, S. & Ahmed, A. M. (2016) "Determinants of Income Inequality among the Earners in Pakistan" S3H Working Paper Series, National University of Sciences and Technology (NUST).

Normand S.L. T., Landrum M.B., Guadagnoli E., Ayanian J.Z., Ryan T.J., Cleary P.D., McNeil B.J.(2001) "Validating recommendations for coronary angiography following an acute myocardial infarction in the elderly: A matched analysis using propensity scores". Journal of Clinical Epidemiology. pp. 387–398.

Rosenbaum, P. R., &. Rubin, D. B. (1983a) "The central role of the propensity scores in observational studies for causal effects." Biometrika., 70, pp. 41–55

Rosenbaum, P. R., &. Rubin, D. B. (1983b). "Assessing sensitivity to an unobserved binary covariate in an observational study with binary outcome." Journal of the Royal Statistical Society, Series B. 45, pp.212–218.

Rosenbaum, P. R., &. Rubin, D. B. (1985) "Constructing a control group using multivariate matched sampling methods that incorporate the propensity score." The American Statistician 39(1), pp. 33-38

Sial, M.S., Zheng, C., Khuong, N.V., Khan, T., Usman, M. (2018), "Does firm performance influence corporate social responsibility reporting of chinese listed companies?" Sustainability, 10(7), pp. 1-12.

Tabassum, U. (2016)"Regional Specialization Trade and economic size of cities" Thesis " University of Karachi.

Weber A, (1909) Über den Standort der Industrien (Mohr, Tübingen). Translated by C. J. Friedrich, 1929, as Alfred Weber’s Theory of the Location of Industries (University of Chicago Press, Chicago)



How to Cite

Tabassum, U. ., Alam, S. ., & Fatima , A. . (2020). Contribution of Spatial Concentration in Exaggerating Inequalities: Across Various Urban Regions of Pakistan. Journal of Applied Economics and Business Studies, 4(4), 187-214.