Assessing the Key Drivers of Sustainable Economic Growth in Laos: Emphasis on Infrastructure Investment

Abstract

This study delves into the factors driving sustainable economic growth in Laos, with a particular emphasis on infrastructure investments. Employing advanced analytical techniques, including GMM regressions and ARDL models, we analyze data spanning from 1995 to 2020, offering valuable insights and policy recommendations. Our consistent findings underscore the pivotal role of electricity infrastructure investments in spurring economic expansion. Highlights the positive impact of telecommunication infrastructure and a skilled workforce, emphasizing the importance of technological advancements and human capital development. An investigation from various angles reveals that variables like agriculture, air transport, industry, and services emerge as significant contributors to growth, emphasizing its multifaceted nature, and we introduce exchange rates as a variable, unveiling their potential for both positive and negative impacts on economic growth. In the long run, our study identifies a positive relationship between air transport, human capital, labor force, industry, services, exchange rates, and economic growth, highlighting their central role in policy efforts. In the short term, we observe that investments in the industry positively influence growth, while exchange rate fluctuations can have adverse effects. Our research underscores the critical importance of infrastructure investments, especially in electricity and air transport, for driving economic growth in Laos. Factors such as mobile telecommunication technology, human capital, agriculture, industry, and services also make substantial contributions to sustained growth. Notably, exchange rates can have both positive and negative effects, underscoring the need for meticulous management by policymakers to support Laos in its pursuit of rapid economic development.