Transport infrastructure and industrial output in Pakistan: An empirical investigation

Abstract

Development of transport infrastructure is considered to be a key factor in contributing socio-economic development. This research contributes towards the existing literature by analyzing the impact of different types of transport infrastructure (i.e., roads, railways, ports and airways on industrial output for Pakistan. Using annual data over a period of four decades, we apply contemporary time series modelling techniques to establish long-run relationships. The findings confirm the presence of a long-run equilibrium relationship among all key variables. Labour, capital, roads and ports infrastructure stimulate industrial output in Pakistan. The long-run elasticities suggest that a 1% increase in port and road infrastructure increases industrial value added by 0.36% and 0.28%, respectively. We find weak railways are deterring industrial output, and airways are found to have neutral effects. Our findings are validated by causality analysis and the model is found to be stable and robust. In the wake of China Pakistan Economic Corridor (CPEC), our findings suggest that future investment in the transport sector should focus more on railways in improving the industrial growth and output of the country.