Effect of social infrastructure investment on economic growth and inequality in South Africa : a SEM approach

Abstract

This paper investigates the effect of social infrastructure on economic growth and inequality in South Africa using a SEM approach. We use growth as the mediating variable while controlling for production factors, urbanisation and globalisation. Results show a positive and significant relationship between education expenditure and growth. However there is a negative but insignificant relationship between health expenditure and growth. Furthermore, results indicate a negative but insignificant relationship between education and inequality and a significant negative relationship between health and inequality. Consistent with the Kuznets theory, we find a positive and significant relationship between growth and inequality in South Africa.