Determinants in the Composition of Investment and Structures in Uganda
Loading...
Files
Date
2012-10
Authors
Abuka, Charles Augustine
Journal Title
Journal ISSN
Volume Title
Publisher
AERC
Abstract
Using a unique data set that disaggregates equipment and structure components of capital formation, the paper examines how investment could respond to changing macroeconomic events. To do this, a stylized analysis of the performance of investment in equipment and structures over the period 1981/82 to 2005/2006 is presented. The findings show that the private investment component was sensitive to changes in relative prices. The analysis does not adequately support the existence of a low elasticity of substitution between the structure and equipment components of aggregate investment, as theory would suggest.
However, when the data are disaggregated between public and private investment, a more plausible result is obtained in which the elasticity of substitution is somewhat higher for the private sector and correspondingly lower for the public sector. There is also
evidence that higher risk in the economy tended to discourage long-term commitment
to structures. Increases in aid flow led to a rise in the price of structures (with a large
non-tradable investment good component) relative to that of equipment. The increase in
structures prices was, therefore, consistent with propositions in boom sector literature.
In particular, increased aid flow tended to positively impact on investment in structures
relative to equipment, which is consistent with the observed significant levels of donor
resources channelled by the government towards social infrastructure projects.
Description
HG 5844 .A3 A 28 2012
Keywords
Investment , Investments - Uganda , Uganda , construction booms , relative prices , equipment, structures