Optimal endowments of transport investment: an empirical analysis for mauritius

We investigated the issue of optimality of the provision of transport capital in economic progress. Using an optimization growth model, a condition allowing the assessment of whether public capital would be under- or overprovided was theoretically derived. By deriving a growth equation from a simple production function, we empirically tested this condition for the case of Mauritius during the period 1950–2005. Transport capital is observed to have played an important role in explaining growth of the country. Same is reported for nontransport capital. Interestingly, the null hypothesis that the coefficients of all the types of capital are equal could be rejected, and the estimated coefficient on transport investment proved to be higher than that on private investment (and the nontransport capital). This suggests that transport capital would still be underprovided for the Mauritian case, despite government investment.