Dynamic Comovement between Social Infrastructure, Economic Growth and Inequality in South Africa

Sixolile Jafta () and Goodness Aye ()
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Goodness Aye: Department of Economics, University of Pretoria

No 201602, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper seeks to examine the dynamic long run relationship between social infrastructure investment, economic growth and inequality in South Africa. Social infrastructure investment is proxied by education and health expenditure. Annual time series data for the period 1994 to 2013 is used. To guard against small sample bias, potential endogeniety and serial correlation problems, the study employed the fully modified ordinary least square (FMOLS) for estimation of the long run relationship. Subsequently, Hansen parameter instability test was applied to test for cointegration. The results of the analysis indicated that education has a positive and significant relationship with economic growth while health expenditure is negatively related to economic growth though not significant. Further, results show that education expenditure is positively related to inequality albeit insignificant while health expenditure is negatively and significantly related to inequality. The null hypothesis that series are cointegrated cannot not be rejected for both economic growth and inequality. Hence, it is concluded that there is a dynamic long run relationship between social infrastructure and economic growth and between social infrastructure and inequality in South Africa.

Keywords: South Africa; Social Infrastructure; Economic growth; Income Inequality; Dynamic; Endogeneity (search for similar items in EconPapers)
JEL-codes: C22 H54 I14 I15 I24 I25 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2016-02
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201602

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