Abstract
This thesis is a collection of four essays assessing the impact of public infrastructure investment in South Africa. Each of the four essays, Chapter 2 to Chapter 5, can be considered as standalone self-contained pieces of work. The thesis general introduction and conclusion are given in Chapter 1 and Chapter 6 respectively.
The first essay (Chapter 2) focused on growth and employment impacts of increasing public infrastructure investment in South Africa, using dynamic computable general equilibrium (CGE) modelling. The results of all simulations showed that an increase in public economic infrastructure investment had positive impacts on economic growth and employment in South African. However, the results indicate that relatively better outcomes are observed when investment in public infrastructure is financed through a combination of tax and government deficit, particularly in the short run and long run.
The second essay (Chapter 3) applied multiplier analysis, structural path analysis (SPA) and CGE modelling to analyse the linkages between the public economic sector and other economic actors following an increase in public economic infrastructure in South Africa. Multiplier analysis indicates that the public economic sector is a significant sector in the South African economy and that it has the strongest backward linkages. This means a shock to this sector, in the form of an increase in public economic infrastructure investment, has a positive economy-wide effect. The public economic sector, as indicated by SPA, impacts on the economy mainly via the formal labour categories. The static CGE analysis results show that an increase in public economic infrastructure investment has an overall positive impact on the South African economy. CGE modelling results and SAM modelling results confirm that increasing public economic infrastructure could help reduce unemployment in South Africa.
The third essay (Chapter 4) applies CGE-microsimulation to investigate the economy-wide and poverty and inequality impacts of an increase in the price of electricity in South Africa. The results indicate that an increase in the price of electricity that results in an increase in output production for the electricity sector and other sectors through supply side effects does not have an entirely negative impact on the economy. Even though inequality does not decline, this provides some relief in terms of poverty.
The fourth essay (Chapter 5) investigated the existence of a nonlinear relationship between capital spending and capital transfers for South African municipalities using the panel smooth transition regression (PSTR) model. The essay analysed factors that contribute to underspending of the capital budget by South Africa municipalities. The results confirm the existence of a nonlinear relationship between municipal government capital spending and capital transfers in South Africa. The results indicate that large amounts of capital transfer are too high for the capacity of some municipalities, which explains persistent underspending of the capital budget.
Ph.D. (Economics)