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On the Regional Incidence of Public Investment in Highways in the USA

Author

Listed:
  • Alfredo M. Pereira

    (Department of Economics, College of William and Mary)

  • Jorge M. Andraz

    (Faculdade de Economia, Universidade do Algarve)

Abstract
The objective of this paper is to investigate the economic and fiscal impact of road infrastructure investment in Portugal, focusing on the effects for each administrative region of both local investments and investments in other regions. We estimate VAR models for the national economy as well as for each of the five regions and using the associated impulse-response functions we find that investment in road infrastructures has been a powerful instrument to increase private investment, to create new permanent jobs and to promote long-term growth in all regions. More importantly, investment in road infrastructure, both at the aggregate level and for each one of the five regions, generates fiscal effects that largely exceed the initial investment itself. Accordingly, there is no trade-off in the long-term between the potentially positive economic effects and the potentially negative budgetary effects of such investments, i.e., both economic and budgetary effects are positive. As a corollary, policies that would reduce current road investment as a response to the current budgetary concerns will result in lower long-term growth as well as worse budgetary conditions in the future.

Suggested Citation

  • Alfredo M. Pereira & Jorge M. Andraz, 2008. "On the Regional Incidence of Public Investment in Highways in the USA," Working Papers 70, Department of Economics, College of William and Mary, revised 15 Sep 2010.
    • Handle: RePEc:cwm:wpaper:70
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    File URL: http://economics.wm.edu/wp/cwm_wp70rev1.pdf
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    References listed on IDEAS

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    2. Michael Ball & Anupam Nanda, 2014. "Does Infrastructure Investment Stimulate Building Supply? The Case of the English Regions," Regional Studies, Taylor & Francis Journals, vol. 48(3), pages 425-438, March.
    3. Andrea Bonilla‐Bolaños, 2021. "A step further in the theory of regional integration: A look at the South American integration strategy," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(5), pages 845-873, July.

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    More about this item

    Keywords

    public investment; road transportation infrastructures; regional spillovers; Portugal;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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