The effectiveness of Public Sector Development Program spending is a debate that has yet been limited to discussions especially when it concerns whether the objective of employment generation is being achieved or not. The present study will explore the relationship between PSDP spending and employment level in Pakistan. We examine the PSDP impact on sectoral employment generation. PSDP spending in Pakistan can generate employment opportunities directly (through public sector investment) and indirectly (through spillover effect) through the private sector investment. We use PSDP data from 1990-2020, and employ a Vector Autoregression (VAR) methodology for the analysis purpose. The results suggest that the effectiveness varies across sectors and PSDP spending is effective only in short run while private investment is more effective in contrast to it. In the long run the effectiveness in Water & Power Sector, Construction and Health Sector. Similarly crowding in effect was also detected in Water & Power and Construction Sector. Overall minimal or no impact was detected by PSDP spending on private investment. Supervisor:- Dr. Naseem Faraz