Investments in basic public infrastructure and their effects on economic growth in a developing country: The case of Cameroon

Abstract

The literature review conducted in this study indicates that there is no unanimity regarding the definition of infrastructure and its impact on growth. While some economists argue that focusing on logistical infrastructure, such as transportation, telecommunications, water, and energy, would be beneficial for governments, others emphasise the importance of social infrastructure, such as health and education. Given the diverse range of opinions, further investigation is required, particularly in the context of Cameroon's infrastructure. The objective of this article is to evaluate the impact of investing in fundamental public infrastructure on economic growth in Cameroon. The study compares the elasticities of various infrastructure types on growth and private investment. With data from WDI 2020, a generalized method of moments is utilised, revealing that the energy sector has the highest contribution. In the majority of studies relating to infrastructure; many are those who are limited to overall infrastructures without however specifying them. Furthermore, the particularity of our study is that we are not interested in the stock of infrastructure, but rather in the amount of investment actually allocated. We are therefore trying to jointly see their repercussions on economic growth and the behaviour of private investments, something which had not yet been done in Cameroon to our knowledge. Therefore we find that the impacts of investments actually allocated do not have the same effects on the growth and behaviour of private investments; for example, everything happens as if there is a crowding out effect between the telecommunications sector and the behaviour of private investments. Macroeconomic performance in Cameroon is positively influenced by investment in road and telecommunications infrastructure. A 1% increase in investment in this sector leads to a 0.0536% boost in economic growth and a 0.329% increase in the private sector. Compared to other forms of infrastructure investment, this sector has a strong impact on the country's economic development. A 1% increase in investment in this sector leads to a 0.0536% boost in economic growth and a 0.329% increase in the private sector. These results allow on the one hand to see the infrastructures which contribute the most to economic growth in a country like Cameroon which is still struggling to take off in its development process. But they will also further densify the public-private partnership which is very important for the quantity but also the quality of infrastructure.