Developing an Inclusive Growth Index: Socio-Economic Determinants and Macroeconomic Perspectives for Pakistan

Abstract

This study developed an inclusive growth index and explored the major determinants of inclusive growth in Pakistan. The index for inclusive growth is constructed using principal component analysis utilizing twenty-four different socio-economic variables grouped under seven dimensions of inclusive growth: economic growth, productive employment, infrastructure endowment, human capabilities, income inequality, gender equity, and governance. Empirical estimation was performed using data from 1980 to 2022. The results show that inflation, domestic investment, and foreign direct investment are significant determinants of inclusive growth in Pakistan