Abstract
Industrial clusters and special economic zones are key areas of focus for industrial policy makers who are aiming to expand the industrial base and increase competitiveness. Thus, the role of development of industrial clusters in the productivity improvement of manufacturing firms merits attention. We use the firm-level Census of Manufacturing Industries (CMI) and Directory of Industries (DOI) datasets to empirically investigate the relationship between agglomeration and firm level total factor productivity for different sectors in Punjab, Pakistan. Our findings suggest that there is a correlation between localization, urbanization and total factor productivity of firms in the Punjab. However, the relationship varies by sectors, necessarily pointing industrial policy towards sector-specific recommendations.
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