Infrastructure and Growth

Muhammad Imran, Javeria Niazi


Physical Infrastructure stocks in Pakistan since the last two
decades have been growing at a very low pace which resulted in
increasing unemployment and very low economic growth in the last four
years. The paper analyses the link between infrastructure, productivity
and growth in Pakistan by applying two distinct methodologies—growth
accounting and growth regressions. We find out that infrastructure stock
has significantly positive impact on productivity and economic growth.
At the individual level, electricity generation, agricultural water
availability and telecommunications impact the economic growth
positively and significantly, while, roads development have no impact.
This is an indication of over investment in roads, especially highways.
Based on model findings, we recommended that Pakistan will have to
increase the allocation of PSDP to above 1.5 percent of the GDP if the
problem of shortage of electricity is to be addressed on a priority
basis so as to raise the growth rate of the economy.

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