Infrastructural investment in long-run economic growth: South Africa 1875–2001

Abstract

Summary Productive public expenditure in the area of infrastructure (such as roads, transportation, and housing) can play an important role in promoting economic growth and encouraging private investment. Developments in endogenous growth theory introduce the possibility of a productive role for public expenditure. This paper seeks to explain the relationship between investment in economic infrastructure and long-run economic growth by examining the experience of South Africa in a time-series context. The main findings that emerge from our examination of economic growth and economic infrastructure in South Africa may be summarized as follows: investment in infrastructure does appear to lead economic growth in South Africa and does so both directly and indirectly (the latter by raising the marginal productivity of capital); there is weak evidence of feedback from output to infrastructure; while the finding of an infrastructure growth impact is robust.