Abstract:

Considering Ethiopia as one of the largest recipients of external development finance and has given a high priority to the development of the transport infrastructure sector in Africa. This study conducted an empirical analysis into broader transport-led economic effect, from the road, air transport, and investment in transport infrastructure perspective using the aggregated annual time series data from 1981 to 2017. We have used the Augmented Dickey-Fuller (ADF) approach to test the unit root. The study has used the auto-regressive distributed lag (ARDL) model and bound test to assess the co-integration among the transport infrastructure components and economic growth in Ethiopia. Finally, the Ordinary Least Square estimation technique has been used to estimate the elasticity of economic growth (GDP Per Capita) via autoregressive distributed lag-error correction model approaches; the results show that there is a long-run relationship running from transport infrastructure to economic growth and significant effects from transport infrastructure components in Ethiopia. The road transport infrastructure, air transport, and investment expenditure in transport infrastructure have a major effect on economic growth with a coefficient estimate. Moreover, the short-run dynamics shows the speed of adjustment is 53% disequilibrium corrected each year towards the long-run path. The study concludes that transport infrastructure foster economic growth in Ethiopia in the long-term.