The Composition of Social Infrastructure and Economic Growth: Modeling a Multi Sector Framework

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The composition of social infrastructure & economic growth

modelling a multi-sector framework

seminar project

submitted on: June 12, 2012

Institute of Economic Theory, -Policy and -History Faculty of Public Economics and Statistics, Leopold-Franzens-University Innsbruck

authors: ID: class: program: year:

Mennel Simon Thomas, Meusburger Josef Simon, Kleinhans Thomas 0816296, 0817769, 0715041 LV 432171-0 12S applied economics WS 2011

Contents
1 Introduction 2 Building up the theoretical framework 2.1 2.2 2.3 Economic Infrastructure . . . . . . . . . . . . . . . . . . . . . . . Social Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . Determining the role of Social Infrastructure . . . . . . . . . . . . 4 4 5 5 6 7 8 8 8 8 9 9 9 10 10 11 11 12

3 The Model 4 Empirical Results 4.1 Data Source and Transformation . . . . . . . . . . . . . . . . . . 4.1.1 4.1.2 4.1.3 4.1.4 4.1.5 4.1.6 4.1.7 4.2 Gross Domestic Product (GDP) . . . . . . . . . . . . . . . Absolute Public Social Spending (PSS) . . . . . . . . . . . Absolute Private Health Spending (PHS) . . . . . . . . . . Absolute Public Health Spending (PUHS) . . . . . . . . . Absolute Education Spending (ESP) . . . . . . . . . . . . Total Labour Force (TLF) . . . . . . . . . . . . . . . . . . Expenditure on R&D (RD) . . . . . . . . . . . . . . . . .

Empirical Analysis . . . . . . . . . . . . . . . . . . . . . . . . . .

5 Interpretation and Conclusion Literatur

List of Figures
1 2 3 4 5 6 7 Gross Domestic Product . . . . . . . . . . . . . . . . . . . . . . . Absolute Public Social Spending . . . . . . . . . . . . . . . . . . . Absolute Private Health Spending . . . . . . . . . . . . . . . . . . Absolute Public Health Spending . . . . . . . . . . . . . . . . . . Absolute Education Spending . . . . . . . . . . . . . . . . . . . . Total Labour Force . . . . . . . . . . . . . . . . . . . . . . . . . . Research and Development . . . . . . . . . . . . . . . . . . . . . . 8 8 9 9 9 10 10

4

1

Introduction
"We do not grow absolutely, chronologically. We grow sometimes in one dimension, and not in another; unevenly. We grow partially. We are relative. We are mature in one realm, childish in another. The past, present, and future mingle and pull us backward, forward, or fix us in the present. We are made up of layers, cells, constellations." (Nin, 1932)

Socio-economic infrastructure can hardly be overemphasized concerning it’s importance in spearheading the pace and direction of economic development of an economy. The volume and quality of this framework determines, to a large extent, the quality of institutions as well as the construction of the welfare state. (Kumar, 2000) Further more, the adequacy of infrastructure on the macroscopic level helps determining one country’s potential in diversifying production, expanding trade, coping with population growth, reducing poverty or improving environmental conditions. On the micro level, infrastructure has a direct interface on the quality of life concerning provision of health care systems, education, housing, civic, utilities, transport, corrections and justice systems. Thus, providing infrastructure plays a dynamic role in influencing socio-cultural and economic determinants. (Oxford, 1994) As a first step, this paper tries to identify social infrastructure as a subset of socio-economic facilities provided by institutions and government policies. This is then used to legitimate social infrastructure as a most important growth affecting determinant on the basis of Hall and Jones (1998). As the theoretical framework is build up, this leads to the main part of the paper focusing on the empirical aspects of social infrastructure influencing economic growth in Austria as a case example for developed countries. In order to interpret the influences of the chosen variables as elasticities, variables having constant increasing growth rates and to limit heteroscedasticity, a Log Log ordinary...
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