Convergence in Human Development across Districts of Pakistan: Evidence from Club Convergence Test

Abstract

Studies on the convergence club have become a focal point in economic growth and development literature over the last three decades. This paper analyzes the club convergence hypothesis going beyond the traditional use of GDP per capita. It examines the convergence club of 97 Pakistani districts over the period 2004-20015. The analysis is based on an augmented index for measuring development through convergence and the clustering method of Phillips and Sul (2007). The index consists of 3 sub-indices of education, health, and household welfare level, with each index further composed of 5 indicators. The Principal Component Analysis (PCA) is used to aggregate these indicators to get sub-indices and a final development index.Results of the study indicate that the districts do not converge to the same long-run equilibrium. Instead of overall convergence, we find eleven convergence clubs and one non-convergent group for human development. The existence of clubs means that measures aimed at reducing disparities in human development and promoting regional growth should consider the specific characteristics revealed in the convergence analyses. Spatial differences thus need to be addressed mainly through pro-poor regional policies.