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The Nexus between Infrastructure (Quantity and Quality) and Economic Growth

Chengete Chakamera and Paul Alagidede ()

No 673, Working Papers from Economic Research Southern Africa

Abstract: This paper examines the growth effects of infrastructure stock and quality in Sub Saharan Africa (SSA). While previous studies established that the poor state of infrastructure in SSA slows economic growth, there is little evidence on infrastructure quality and a robust analysis on the causal links between infrastructure and economic growth. Using principal components analysis to cluster different infrastructure measures and examining the infrastructure-growth nexus in a Generalized Method of Moments while accounting for heterogeneity in a panel setting, our results reveal strong evidence of a positive effect of infrastructure development on economic growth with most contribution coming from infrastructure stock. The quality-growth effect is weak, thus giving credence to the combined effects of infrastructure stock and quality on growth, especially in regions with moderately high quality, and smaller in those with poorer quality. Among the disaggregated infrastructure components, electricity supply exerted the greatest downward pressure on growth in SSA. Lastly, we find evidence for a unidirectional causality from aggregate infrastructure to growth. A number of policy implications are discussed.

Keywords: Infrastructure stock; Infrastructure quality; economic growth; Nexus; causality (search for similar items in EconPapers)
Pages: 34 pages
Date: 2017-03
New Economics Papers: this item is included in nep-dev, nep-gro and nep-ure
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