Showing papers by "John M. Luiz published in 2005"

An analysis of economic infrastructure investment in south africa

Abstract: This paper analyses long-term trends in the development of South Africa's economic infrastructure and discusses their relationship with the country's long-term economic growth. A database covering national accounts data, railways, roads, ports, air travel, phone lines and electricity was established for this purpose, and may facilitate further quantitative research. PSS (Pesaran, Shin and Smith, 1996, 2001) F-tests are used to identify directions of association between economic infrastructure and economic growth. These indicate long-run forcing relationships from public-sector economic infrastructure investment and fixed capital stock to gross domestic product (GDP), from roads to GDP, and from GDP to a range of other types of infrastructure. There is also evidence of potential simultaneity between specific types of infrastructure and GDP. The evidence suggests three main findings. Firstly, the relationship between economic infrastructure and economic growth appears to run in both directions. Inadequate investment in infrastructure could create bottlenecks, and opportunities for promoting economic growth could be missed. Secondly, South Africa's stock of economic infrastructure has developed in phases. Policymakers should focus on choosing or encouraging the right type of infrastructure at the right time. Thirdly, the need for investment in economic infrastructure never goes away. The maintenance and expansion of infrastructure are important dimensions of supporting economic activity in a growing economy, provided that individual projects are chosen on the basis of appropriate cost-benefit analyses. JEL: H54, L91, L92, L93, L94, L96, L98, N47, N77, E62

Does Human Generate Social and Institutional Capital? Exploring Evidence From Time Series Data in a Middle Income Country

Abstract: This paper presents an analysis of the interaction of human capital investment and the development of social and political institutions. We find that human capital matters - for growth through its quality dimension; for distributional conflict by raising political aspirations. But human capital does not stand alone either. The level of economic development (output) matters, distributional (instability) confl ict as well as the rights dispensation can come to influence human capital investment decisions in their own right. Social, human capital, political as well as economic dimensions are densely interwoven in webs of association.

The Political Economy of Institutions, Stability and Investment: a simultaneous equation approach in an emerging economy – the case of South Africa

Abstract: The modern theory of investment identities the importance of uncertainty to investment. A number of empirical studies have tested the theory on South African time series, employing political instability measures as proxies for uncertainty. This paper verifies that political instability measures are required in the formulation of the investment function for South Africa. It also establishes that there are distinct institutional factors that influence the uncertainty variable such as property rights and crime levels. We find that rising income and property rights lower political instability, and that rising crime levels are positively related to political instability. The inference is that political instability in South Africa may not represent uncertainty directly, since it is systematically related to a set of determinants. Instead, uncertainty would have to be understood as being related to a broader institutional nexus that in concert may generate uncertainty for investors.

Fractionalization and Lon-Run Economic Growth: Webs and Direction of Association between the Economic and the Social - South Africa as a Time Series Case Study

Abstract: Recent cross sectional growth studies have found that ethnolinguistic fractionalization is an important explanatory variable of long-run growth performance. In the present paper we follow the call of earlier studies to conduct a more detailed clinical analysis of the growth experience of a specific country. South Africa constitutes an interesting case in which to explore these questions. The results of this study provide important nuance to the existing body of evidence. We find that fractionalization is subject to strong change over time. In addition, we find strong evidence of webs of association between the various social, political and institutional dimensions. Thus various forms of social cleavage tend to go hand in hand which presents the danger of spurious inference of association. Further, the direction of association in the preponderance of cases runs from economic to social, political and institutional variables, rather than the other way around. However, there remain significant impacts from some, but only some fractionalization indexes on economic growth. Which social cleavage, when, how and for what period of time will depend on the historical path of specific societies.

Using Fractionalization Indexes: deriving methodological principles for growth studies from time series evidence

Abstract: Recent cross country growth studies have found that ethnolinguistic fractionalization is an important explanatory variable of long-run growth performance. This paper highlights some limitations of cross country studies by focusing on the time series evidence for South Africa. In presenting variation over time in a number of social, political and economic dimensions, this paper adds longitudinal evidence on a range of dimensions that have been linked to long run economic development. Given South Africa’s history of ethnic and racial politics, it constitutes a useful case study to explore the dynamics of the possible effects of ethnolinguistic fractionalization on growth. We introduce three new sets of fractionalization indicators for South Africa and one set of political indicators. The results of this study provide important nuance to the existing body of evidence, for the use of fractionalization indices in growth studies.