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The Impact of Basic and Social Infrastructure Investment on Economic Growth and Social Development in South Africa’s Urban and Rural Municipalities

Henk Gnade, Derick Blaauw and Talita Greyling
Publication date
October 2016

Basic and social infrastructure investment can assist in addressing widespread inequality and divided societies by promoting economic growth and social development. The aim of this study is to determine whether basic and social infrastructures investment differently affect economic growth and social development indicators of urban and rural municipalities. We used a balanced panel dataset containing infrastructure, economic, demographic and social indicators for rural and urban municipalities for the period from 1996 to 2012. Principal component analysis was used to construct synthetic indices of basic and social infrastructure. Restricted within LSDV estimation techniques are used to evaluate the differences between urban and rural municipalities. The elasticities of basic and social infrastructure investment generally are more pronounced for economic growth and social development indicators in rural municipalities. These findings could potentially influence policy decisions in terms of infrastructure investment in favour of rural municipalities to increase economic growth and social development.

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Series title
Working paper 645
Development Southern Africa
JEL classifications