Abstract
Basic infrastructure investment and social infrastructure investment have different impacts on
economic growth and social development in urban and rural municipalities respectively. Empirical
analysis of the impact that basic and social infrastructures have on economic growth and social
development in urban and rural municipalities respectively is however largely lacking. Such
estimates could be used to influence basic and social infrastructure investment decisions towards
correcting inequalities that exist between urban and rural municipalities. A balanced panel dataset
containing infrastructure, economic, demographic and social indicators are used to compile
synthetic indices for basic and social infrastructure (using principal component analysis) and the
analysis. Restricted within the least square dummy variable (LSDV), estimation techniques are used
to calculate the respective elasticities and to evaluate if the differences between urban and rural
municipalities are statistically significant. The results indicate that basic and social infrastructure
have different impacts on economic growth and social development in urban and rural
municipalities. The results also indicate that both basic and social infrastructure investment
generally have a greater economic growth and social development impact in rural municipalities.
The research provides an empirical framework and actionable elasticities for the respective impact
that basic and social infrastructure investment have on urban and rural municipalities, which is
largely under-researched. Knowing that basic and social infrastructure investment have a greater
impact on economic growth and social development in rural municipalities can therefore influence
policy and investment decisions towards the reduction of inequalities experienced between urban
and rural municipalities.
M.Com.