Construction and economic development: A stimulus or constraint in developing countries

This study examines the impact of the construction sector on productivity in developing countries. Hypotheses are posed to determined how these effects might be established, reinforced, or predicted. To obtain economic growth in developing countries the construction sector acts as a catalyst whose effective utilization has a significant impact on production output by other public sectors which include manufacturing, tourism, and agriculture. A cluster of industries representing the construction sector is defined based on identifiable characteristics. Evidence of construction externalizes and spinoffs from various countries is analyzed and presented. Emphasis is placed on the effects of construction with the use of the Cobb-Douglas production function and the Harrow-Damar model. The relevance of these for industrialized and developing countries is discussed and projections are derived from these two economic tools. The country of Jamaica, West Indies, is used as a case study to illustrate the concrete trends within the construction sector. A survey was conducted through the auspices of the Institute of Social and Economic Research at The University of the West Indies. A Construction Demand Determinant (CDD) was designed as a tool to assist development planners to better allocate scarce construction resources and to enable them to link planned construction output with the capacities of the supportive infrastructure and government and regulatory capabilities. The role of construction in capital formation and gross domestic product (GDP) is analyzed with the use of an Input-Output model of the economy and the importance of the various backward and forward linkages identified and highlighted. On the basis of this study, a plan which suggests the basis of a model for developing countries was formulated for the restructuring of the Jamaican construction sector so that it may better serve the demands of a developing economy. The plan stresses the need for strengthening the backward and forward linkages, modernizing the information technology base of the construction sector, preventing monopoly control of material supplies, optimizing the use of labor and designs that are more appropriate for local conditions, and encouraging the financial system to support construction activities.