DYNAMIC PANEL DATA ANALYSIS OF THE IMPACT OF PUBLIC SECTOR INVESTMENT ON PRIVATE SECTOR INVESTMENT GROWTH IN SUB-SAHARAN AFRICA
Date
2018-11-12
Authors
BOIKANYO, PHEMELO
Journal Title
Journal ISSN
Volume Title
Publisher
University Of Bostwana
Abstract
The present sought to analyze the impact of public sector investment on private sector investment
in Sub-Saharan Africa. The study utilized panel data from 2005-2015 across forty-five SubSaharan African economies. To estimate the results, the study employed the Two-Step System
GMM model as developed by (Arelano & Bover, 1995). In the presence of endogeneity, GMM is
one of the robust estimation techniques that produces unbiased, efficient, and consistent estimators.
For the validity of the instruments and presence of second-order serial correlation, the study used
the Difference-in-Hansen and the Arrellano-Bond specification tests, respectively. The results
from the study reflect that public sector investment negatively and significantly impacts private
sector investment in Sub-Saharan Africa. Therefore, public sector investment crowds-out private
sector investment. To account for the heterogeneous nature of countries in the region, the study
conducted a sub-sample analysis by dividing the sample into low-income countries and lowerincome and upper-middle income economies. Results from the sub-sample analysis showed that
public sector investment bore no significant effect on private sector investment in low-income
countries sample. As regards lower-income and upper-middle income economies, public sector
investment crowds-out private sector investment. To minimize the crowding-out effects of public
sector investment on private sector investment, the study recommends four policy interventions:
proliferation and mobilization of domestic resources; inclusive models of public sector investment;
strengthening of public sector financial managements systems, and regional integration of public
infrastructure development.
Description
Keywords
Investment, , GMM, , Difference-in-Hansen, , Public Sector, , Private Sector, , Arrellano Bond,