Abstract
Infrastructure development is considered a key factor in promoting economic growth and attracting foreign investors for sustainable production and productivity. Conversely, inadequate levels of infrastructure constrain economic growth, a situation developing countries find themselves in. This requires the government to invest in infrastructure supplemented by external financing. This chapter, therefore, discusses how levels of infrastructure development affect economic growth in Ghana, since 1986 to date. The focus is on road transport infrastructure and its impact on economic growth under successive Ghanaian governments. Using the Cobb-Douglas production function and Vector Auto-regression (VAR) approach our analysis shows a positive relationship between infrastructure development and economic growth. This explains governments' improved allocation and expenditure on infrastructure development and maintenance in the 2000s. Ghana governments' attempts to plan and prioritize development of infrastructure, roads in particular, and create a culture of maintenance are targeted at raising the country's competitiveness and attractiveness to foster growth of all sectors of the economy.
TopIn this section, a review of the theoretical and empirical literature on the role of infrastructure in growth, competitiveness, and development is undertaken. The literature with a focus on Africa is presented as well to pave the way for our discussion of Ghana, as a case study.
Key Terms in this Chapter
Growth Domestic Product: It is the monetary value of the total amount of goods and services produced by the national economy annually.
Infrastructure Investment: It is the financing of construction of sectors of infrastructure.
Vector Auto-Regressive Model (VAR): It is a model which imposes less theoretical a priori restrictions between noted variables. Instead, it facilitates the ascertaining of whether there is a substantial growth feedback effects among the applied variables.
Infrastructure: It is defined as physical and organizational structures for running a country. These include structural elements such as roads, power, telecommunications, schools, hospitals, water supply and waste management which facilitate production and distribution of goods and services and enable a country’s development ( Bhattacharya, 2012 , pp. 14-15).
Infrastructure Development: It involves improvement of the quality of the various components of infrastructure, such as roads, power, ICT, water and sanitation.
Growth and Development: Growth is the increase in output of an economy or number of industries established in an economy. Development goes beyond growth to include improved living conditions and welfare and structural transformation of the economy from a subsistence and agriculture based to a manufacturing one from which the majority of the population derive their livelihood.
Cobb-Douglas Production Function: It views infrastructure as an input that determines economic growth.