Industrial Value Added and Urbanisation Dynamics in South Asia: Panel Data Evidence Using the Driscoll–Kraay Estimator

Abstract

This study examines the macroeconomic determinants of urbanisation in Pakistan, Bangladesh, India, and Sri Lanka from 1980 to 2024. Rapid urbanisation in South Asia is linked with industrialisation and economic transformation. Identifying its key drivers is important for sustainable urban development. The study uses a quantitative panel data approach based on annual secondary data from four South Asian countries. Urbanisation is the dependent variable, while industrial value added, GDP growth, trade openness, population density, population growth, and inflation are explanatory variables. The Fixed Effects Model with Driscoll–Kraay standard errors was applied after detecting heteroscedasticity, autocorrelation, and cross sectional dependence. Trade openness and inflation positively and significantly affect urbanisation, whereas population density has a negative effect. Industrial value added and GDP growth also influence urbanisation trends. Policymakers should encourage balanced industrial growth and effective urban planning to manage rapid urban expansion.