Analysing job creation effects of scaling up infrastructure spending in South Africa

Figures & data

Table 1. The impact of an increase in the stock of public capital on output

Study	Focus of study	Output elasticity of public capital
Aschauer (1989)	US national	0.39
Holz-Eakin (1988)	US national	0.39
Munnell (1990a)	US national	0.34
Costa et al. (1987)	US states	0.20
Eisener (1991)	US states	0.17
Mera (1973)	Japanese regions	0.20
Munnell (1990b)	US states	0.15
Duffy-Deno & Eberts (1989)	US metropolitan areas	0.08
Eberts (1986, 1990)	US metropolitan areas	0.03

Source: Table adopted from Munnell (1992:194).

Table 2. The impact of an increase in the stock of public capital on output in South Africa

Study	Infrastructure measure (on economic growth)	Econometric technique	Output elasticity
Abedian & van Seventer (1995)	Public authorities' capital stock	OLS	0.33
	Public-sector capital stock	OLS	0.17
Development Bank of South Africa (1998)	Public authorities' capital stock	OLS	0.25
		Cointegration	0.3
	Public-sector capital stock	OLS	0.15
		Cointegration	0.28
	Public-sector infrastructure stock	OLS	0.17
		Cointegration	0.25
Fedderke et al. (2005)	Electricity generation	VECM	0.1–0.2 and rising to 0.5 after controlling for institutions
Bogetic & Fedderke (2005)	Infrastructure measures on labour productivity	VECM	0.2–0.4
	Infrastructure measures on total factor productivity	VECM	−0.6
Fourie (2006)	Electricity generation	VECM	0.2
	Electricity generation on a measure of equity performance	VECM	0.38
	Social infrastructure	VAR	0.01–0.02

Note: OLS = ordinary least squares; VAR = vector autoregressions; VECM = vector error correction models.

Source: Table adopted from Fourie (2006) and extended by the authors.

Table 3. South African investment plan

	November 2010	December 2011	2012/13	2013/14	2014/15
Economic services	161.9	197.3	217.8	228.2	230.1
Energy	52.5	71.7	90.4	98.8	102.7
Water and sanitation	14.4	17.8	20.6	19.9	19.8
Transport and logistics	69.1	79.5	76.3	76.9	72.3
Other economic services	25.8	28.4	30.4	32.5	35.2
Social services	17.2	26.6	26.8	32.5	35.2
Health	6.7	10	9.6	13.9	15.2
Education	6	9.1	9.8	11.2	11.2
Community facilities	3.5	5.2	4.7	4.8	6.2
Other social services	1	2.4	2.6	2.6	2.7
Justice and protection	3.8	4.1	4.4	5.1	5.8
services
Central government and	2.1	4.2	8	3.5	2.5
Financial services	0.3	0.7	0.7	0.7	0.8
Total	185.3	232.9	257.6	269.9	274.4

Source: Medium Term Budget Policy Statement (National Treasury, 2011:26, Table 3.2).

Table 4. Impact on production (% to BAU)

Sector	Short run	Long run (2020)
Agriculture, forestry and fishing	0.10	0.03
Coal mining	0.02	−0.42
Gold and uranium ore mining	0.37	4.23
Other mining	0.05	−1.76
Food	0.09	0.23
Textiles	0.18	0.92
Footwear	0.14	0.60
Coke and refined petroleum products	0.12	0.25
Non-metallic minerals	0.94	5.26
Basic iron and steel and non-ferrous metals	−0.58	−5.75
Machinery and equipment	−2.13	−17.06
Radio and telecommunication	0.78	4.60
Transport equipment	0.68	4.23
Other manufacturing	0.81	5.09
Electricity, gas and steam	0.16	2.94
Water supply	0.09	0.42
Building construction	1.86	10.81
Wholesale and retail trade	0.07	−0.18
Catering and accommodation services	0.11	−0.14
Transport services	0.07	−0.07
Communication	0.07	−0.18
Finance and insurance	−0.20	−1.44
Business services	−0.42	−4.41
Other services	0.15	1.40
Public services	0.53	8.45

Note: BAU = business as usual.

Figure 1. Impact on GDP Note: BAU = business as usual; SIM 1 = simulation 1.

Table 5. Impact on unemployment (% to BAU)

	Short run			Long run (2020)
	FinA	FinB	FinC	FinA	FinB	FinC
Legislators	42.75	17.09	156.38	50.39		877.84
Professionals	67.29	36.75	185.02	171.88	−32.04	1076.57
Technicians	37.11	18.05	119.78	73.07	−34.51	606.59
Clerks	4.46	2.21	10.58	13.99	−0.81	60.01
Service workers	1.49	0.4	5.74	−4.79	−11.15	29.8
Skilled agricultural workers	7.73	3.46	14.83	38.36	8.2	88.72
Craft workers	0.37	−0.4	8	−8.44	−13.02	47.01
Plant and machine operators	2.82	0.98	10.2	6.33	−6.14	60.83
Elementary occupations	−2.77	−2.36	1.58	−24.1	−21.81	7.61
Domestic workers	1.4	0.39	4.76	3	−3.53	28.01
Occupation unspecified	1.71	0.6	5.1	5.26	−1.61	30.42

Note: BAU = business as usual.

Table 6. Impact on production (% to BAU)

	FinA		FinB		FinC
	Short run	Long run	Short run	Long run	Short run	Long run
Agriculture, forestry and fishing	−0.50	−1.20	−0.23	−0.43	−1.06	−6.00
Coal mining	0.00	3.96	0.01	2.38	−0.82	−3.47
Gold and uranium ore mining	0.55	10.05	0.47	8.46	−0.18	4.12
Other mining	0.42	7.05	0.25	3.39	−0.19	0.97
Food	−0.94	−4.52	−0.48	−2.20	−1.44	−8.53
Textiles	−1.50	−6.84	−0.74	−2.97	−2.41	−14.41
Footwear	−1.32	−6.27	−0.66	−2.89	−2.21	−13.29
Coke and refined petroleum products	−0.27	1.24	−0.09	1.12	−0.92	−4.60
Non-metallic minerals	3.03	25.42	2.08	16.73	1.97	16.45
Basic iron and steel and non-ferrous metals	0.79	9.13	0.16	2.93	−0.38	−0.51
Machinery and equipment	0.68	7.52	−0.60	−2.97	−0.65	−3.18
Radio and telecommunication	0.78	9.18	0.78	7.63	−0.49	−1.23
Transport equipment	0.80	9.06	0.74	7.33	−0.64	−2.51
Other manufactories	0.58	8.00	0.68	7.06	−0.17	1.56
Electricity, gas and steam	−1.08	−2.92	−0.51	0.12	−1.64	−8.62
Water supply	−0.99	−3.43	−0.50	−1.35	−1.52	−8.47
Building construction	5.87	43.49	4.05	29.36	4.40	32.09
Wholesale and retail trade	−0.23	1.34	−0.09	0.99	−0.91	−4.55
Catering and accommodation services	−1.34	−6.01	−0.68	−2.94	−2.11	−12.53
Transport services	−0.21	1.27	−0.08	0.93	−0.77	−3.77
Communication	−0.92	−3.24	−0.47	−1.48	−1.48	−8.63
Finance and insurance	−0.98	−3.13	−0.63	−1.74	−1.76	−9.49
Business services	−0.52	−0.77	−0.48	−2.15	−1.06	−6.25
Other services	−1.57	−7.57	−0.79	−3.31	−1.97	−11.32
Public services	0.57	10.32	0.55	9.89	0.28	6.87

Note: BAU = business as usual.

Figure 2. Impact on total investment Note: BAU = business as usual.

Figure 3. Impact on GDP (at basic prices) Note: BAU = business as usual.

Aschauer, DA, 1989. Is public expenditure productive. Journal of Monetary Economics 23, 177–200. doi: 10.1016/0304-3932(89)90047-0

 Web of Science ®Google Scholar

Holtz-Eakin, D, 1988. Private output, government capital, and the infrastructure crisis. Discussion paper no. 394, Columbia University, New York NY.

 Google Scholar

Munnell, A, 1990a. Why has productivity growth declined? Productivity and public investment. New England Economic Review (Jan/Feb), 3–22.

 Google Scholar

Costa, JDS, Ellson, RW & Martin, RC, 1987. Public capital, regional output, and development: Some empirical evidence. Journal of Regional Science 27, 419–437. doi: 10.1111/j.1467-9787.1987.tb01171.x

 Web of Science ®Google Scholar

Eisner, R, 1991. Infrastructure and regional economic performance: Comment. New England Economic Review (Sept/Oct), 47–58.

 Google Scholar

Mera, K, 1973. Regional production functions and social overhead capital: An analysis of the Japanese case. Regional and Urban Economics (3), 157–185. doi: 10.1016/0034-3331(73)90024-9

 Google Scholar

Munnell, A, 1990b. How does public infrastructure affect regional performance? New England Economic Review (Sept/Oct), 11–32.

 Google Scholar

Eberts, RW, 1986. Estimating the contribution of urban public infrastructure to regional growth. Working paper no. 8610, Federal Reserve Bank, Cleveland OH.

 Google Scholar

Eberts, RW, 1990. Public infrastructure and regional economic development. Federal Reserve Bank of Cleveland Economic Review (26), 15–27.

 Google Scholar

Munnell, AH, 1992. Policy watch: Infrastructure investment and economic growth. The Journal of Economic Perspectives 6(4), 189–198. doi: 10.1257/jep.6.4.189

 Web of Science ®Google Scholar

Abedian, I & Van Seventer, D, 1995. Productivity and multiplier analysis of infrastructure investment in South Africa: An econometric investigation and preliminary policy implications. Ministry of Finance, Mimeo, Pretoria.

 Google Scholar

Development Bank of South Africa, 1998. Infrastructure: A foundation for development. Development Report 1998: Pretoria.

 Google Scholar

Fedderke, J, Perkins, P & Luiz, J, 2005. Infrastructure investment in long-run economic growth: South Africa 1875–2001. Preliminary draft. Available online: http://www.uct.ac.za/economics

 Google Scholar

Bogetic, Z & Fedderke, J, 2005. Infrastructure and growth in South Africa: Benchmarking, productivity and investment needs. Presented at the ESSA conference 2005. Available online: http://www.essa.org.za/

 Google Scholar

Fourie, J, 2006. Some policy proposals for future infrastructure investment in South Africa. Stellenbosch Economic Working Papers: 05/06, Department of Economics, University of Stellenbosch.

 Google Scholar

National Treasury, 2011. Medium term budget policy statement, Republic of South Africa, available online at http://www.treasury.gov.za/documents/mtbps/2011/mtbps/MTBPS%202011%20Full%20Document.pdf

 Google Scholar