THE IMPACT OF TECHNOLOGICAL INNOVATION ON HOUSEHOLD CONSUMPTION IN PAKISTAN: EMPIRICAL EVIDENCE FROM STRUCTURAL BREAK ANALYSIS

Abstract

The paper evaluates the effect of technological innovation on household final consumption expenditure in Pakistan (1982-2024) using the presence of structural breaks. Incorporating patent data in a consumption model, the analysis shows that there is a stable long-run relationship. The findings indicate that a 1% change in patent applications will result in a 0.24 percent change in long-run consumption, which proves that innovation is a positive factor. The effect of GDP per capita is stronger (elasticity of 0.90%), and that of domestic credit to the private sector is negative (0.25%). Military spending has a positive impact on consumption (0.51% elasticity). The results are in support of innovation-based and credit-efficiency policies that could enhance sustainable domestic demand in Pakistan.