THE DETERMINANTS OF REGIONAL DEVELOPMENT DISPARITIES IN SRI LANKA: AN EMPIRICAL INVESTIGATION INTO THE REGIONAL DEVELOPMENT POLICY AND ISSUES

Abstract

Being one of the highest countries to have recorded inequality in the case of regional development in South Asian region, Sri Lanka confronts detrimental impacts on its future development due to lack of attention of respective authorities on the issue of regional disparity. Although the Provincial Council system in Sri Lanka was initiated to provide greater autonomy to local governments to take necessary measures to increase the local share of the resources and thereby mitigate the regional disparities, the issue still remained unaddressed. Therefore, addressing this issue is timely in order to improve the efficiency of socio-economic performance and political stability. With this background, this study mainly aims to investigate the dynamics and main determinants of generating regional development disparities in Sri Lanka. The methodology of this study is mainly based on the panel data analysis following fixed effect and cross-sectional effect estimation for the period of 2010-2015. The empirical results of the study show that there is a greater income concentration on Western Province whereas the other regions perform relatively poor. According to our estimation results, the development potentials of other regions depends on provincial-wise capital and recurrent expenditure, investment in education sector for increasing provincial-wise per capita GDP. Hence, these results indicate that corrective measures for addressing regional disparities is basically based on education, capital and recurrent expenditures, but not further expansion of expenditures on administrative functions.