Empir Econ (2011) 40:827–838 DOI 10.1007/s00181-010-0363-x Optimal endowments of transport investment: an empirical analysis for mauritius Boopen Seetanah Received: 17 March 2008 / Accepted: 24 November 2009 / Published online: 4 April 2010 © Springer-Verlag 2010 Abstract We investigated the issue of optimality of the provision of transport capital in economic progress. Using an optimization growth model, a condition allow- ing the assessment of whether public capital would be under- or overprovided was theoretically derived. By deriving a growth equation from a simple production func- tion, 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 explain- ing 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 trans- port capital would still be underprovided for the Mauritian case, despite government investment. Keywords Optimal endowments · Transport investment · OLS · Mauritius JEL Classification O10 · O22 · H41 1 Introduction All countries invest heavily in their public capital stock and such investments are required for a strong, flexible, and dynamic economy. Since Aschauer (1989) pioneer- ing and influential contribution, the role of public investment has been empirically assessed to be a crucial factor leading to higher private capital productivity, which would lead in turn to higher growth rates. A comprehensive survey of that literature, B. Seetanah (B ) University of Mauritius, Reduit, Mauritius e-mail: b.seetanah@uom.ac.mu 123