Dynamic effects of energy sector public investment on sectoral economic growth: experience from Pakistan economy

Author Affiliation

Qazi Masood Ahmed is Professor at Institute of Business Administration (IBA), Karachi

Faculty / School

Faculty of Business Administration (FBA)

Department

Department of Economics

Was this content written or created while at IBA?

Yes

Document Type

Article

Source Publication

Pakistan Development Review

ISSN

0030-9729

Disciplines

Geography | Social and Behavioral Sciences

Abstract

This study is an addition to a few studies in the developing countries generally, and in Pakistan particularly, which aim at investigating the effects of public investment in energy sector on sectoral output, investment and employment. This study estimates the dynamic elasticities of private investment with respect to public investment to find crowding-out or crowding-in phenomenon in Pakistan, and also to find out the long term marginal productivity and the share of benefits. In addition the Study also reveals the changes in labour absorption due to additional capital. The study covers eight sectors of the Pakistan economy and uses the annual time series data from 1981 to 2011. Vector Auto Regressive (VAR/VECM) technique as developed by Pereira (2000, 2001), which allows measuring the dynamic feedback effect among the variables is used in the current study. Twenty four sectoral elasticity coefficients for public investment in energy sector are estimated. Of these seven out of eight confirm crowding-in phenomenon in Pakistan economy. This overwhelming evidence confirms that this public investment has positive effect on private investment. The three out of eight elasticity coefficients show public investment has increased labour absorption and remaining five show labour is substituted by capital as a result of increased public investment. Seven out of eight elasticity coefficients show positive output effect, however the overall marginal productivities are lower compared to several developing countries like Portugal and Spain where such analysis has been conducted.

Indexing Information

HJRS - Y Category, Scopus

Publication Status

Published

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