Quantifying the relationship between aggregate GDP and construction value added in a small petroleum rich economy – a case study of Trinidad and Tobago

The relationship between gross domestic product and the output of the construction industry is quantified, using as a case study the economy of Trinidad and Tobago (T&T). A historical perspective is used in order that anomalies can be set within the context of the relevant time and circumstances. Because the economy of Trinidad and Tobago is highly dependent on oil and gas revenues, the relationships between construction value added, GDP and oil and gas industry parameters are also included. In nearly all instances there are positive relationships between the parameters examined, and values for the various correlation coefficients have been obtained. An examination of causal factors obtained from a cumulative experience analysis also establishes that the direction of causality runs from the changes in GDP to the increase in construction value added, both at the aggregate level and at the per capita level. A similar positive relationship and direction of temporal causality is apparent between oil and gas revenues (and prices) and construction value added. These relationships are untypical, as smaller developing economies that do not have oil resources would be expected to show negative correlations for these relationships.