Socio-Economic Determinants of Construction Sector Development

Research by: Florian Gerth, Martin O’Brien, & Karol S. Sikora

Executive Summary

This paper presents an empirical investigation into the socio-economic drivers of construction sector development in Cambodia, a country undergoing rapid urbanization and economic transition. Drawing from national data collected between 2010 and 2019, the study examines how educational attainment, demographic patterns, infrastructure development, and macroeconomic variables influence different categories of construction activity, including private dwellings, commercial buildings, industrial structures, and investment-focused projects.

The research stands apart by employing a broad macro-socioeconomic lens rather than focusing narrowly on construction productivity or project-level efficiencies. Using econometric models, including Ordinary Least Squares (OLS) and Method-of-Moments (MM), the authors explore how 19 socio-economic variables relate to six construction activity types. These are: public, dwelling, industry, commercial, tourism, and investment projects.

Key findings reveal a nuanced and multifaceted relationship between development and construction. For example, private housing construction is positively influenced by infrastructure expansion (e.g., roads) and employment in the education sector, while it is negatively impacted by a higher share of individuals with only primary education and, interestingly, by improved net exports. This suggests that increased trade may divert domestic resources from the housing sector.

In contrast, public and tourism-related construction shows no statistically significant connection to the included socio-economic variables, implying that political and external factors dominate these segments. Industrial and commercial projects are driven by employment, small enterprise growth, and education-related indicators. Meanwhile, the findings for investment-focused construction projects are mixed: while a rising number of students correlates with more such activity, a higher proportion of secondary-educated individuals is linked to reduced speculative investment, possibly due to more risk-averse behavior among the better educated.

Importantly, the study emphasizes that education and infrastructure are among the most powerful levers for driving sustainable and inclusive construction sector growth. Informed by human capital theory and development economics, the analysis suggests that boosting educational outcomes and connectivity (e.g., road networks, vehicle use) indirectly encourages construction by raising productivity and purchasing power.

From a policy perspective, the paper makes several recommendations:

• Invest in education to foster long-term income growth and homeownership.
• Prioritize infrastructure development to catalyze housing and commercial construction.
• Support SMEs to stimulate demand for commercial properties.
• Implement efficient regulatory frameworks to prevent misallocation and speculative bubbles.
• Adopt sustainable construction materials and methods, such as bamboo or engineered timber, to ensure environmental and economic resilience.

This research fills a gap in the literature by linking macroeconomic and social variables to construction activity. It suggests that a thriving construction sector does not emerge in isolation but evolves alongside education, employment, demographic maturity, and infrastructure investment. It offers an important roadmap for policymakers and stakeholders aiming to develop the sector responsibly and strategically.

To cite this article:

Gerth, F., O’Brien, M., & Sikora, K. S. (2025). Socio‑economic determinants of construction sector development. SocioEconomic Challenges, 9(2), 78–91. https://doi.org/10.61093/sec.9(2).78-91.2025

To access the article: https://armgpublishing.com/journals/sec/volume-9-issue-2/article-5/

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