Impacts of Fiscal Decentralization on Spatial Disparities across Districts of Punjab, Pakistan

Abstract

The spatial disparities in human development level have been a vital concern in Pakistan’s
history. In this perspective, the literature on regional development has recently underlined how
crucial it is to analyze human development phenomena through the lens of spatial models, for instance, density, locality and distance. The study investigates the impact of fiscal decentralization
on the human development level at the district level in province of Punjab, Pakistan. The analysis is
based on an augmented development Index, which consists of 3 sub-indices of education, health, and
household welfare level; with each index further consists of 5 indicators. The Principal Component
Analysis (PCA) aggregates these indicators to get sub-indices and a final development index. The
results of the study showed that significant positive impacts of fiscal decentralization on the human
development index at the district level are conditional on the distance of districts from the capital city
— the valuable impacts of fiscal decentralization increase as the “distance from the city” decreases.
Since the geography of development matters, it is recommended to reduce across districts inequalities by developing the social and economic institutions and infrastructure in the underdeveloped
districts of the country.