International competitiveness and ex-ante treatment effects of CPEC on household welfare in Pakistan

Abstract

Purpose This paper aims to presents one of the first direct micro-econometric impact of competitive industries (based on revealed comparative advantage [RCA] between Pakistan and China) on household welfare in Pakistan using semi-parametric matching technique. Design/methodology/approach The study has also measured and identified the industrial competitiveness in both agricultural and non-agricultural (manufacturing) industries using RCA approach. RCA at the four-digit ISIC level are matched to household survey data (Pakistan Social and Living Standard Measurement) for 2013-2014 to represent the competitive industries in which the household’s higher earner is employed. Findings The findings of the study reveal that the China–Pakistan ex-post treatment effect (industrial competitiveness) provides welfare-improving effects. Furthermore, on this behalf, this study further assesses ex-ante treatment effects of recently signed China–Pakistan Economic Corridor (CPEC) on household welfare and suggests that CPEC would boost further trade liberalization and, therefore, would lead to industrial competitiveness and hence economic growth. Originality/value Paper contributes to two streams of literature. First, it measures and identifies the industrial competitiveness in both agricultural and non-agricultural industries using RCA approach; and second, it assesses the welfare of those households associated with these industries using semi-parametric propensity score matching technique.