01024528

Component

This paper describes how knowledge about the productivity effects of infrastructure would allow more informed decisions to be made on the overall budget allocations for infrastructure investment in general and transportation infrastructure in particular. This paper analyzes the macroeconomic productivity effects of road investment in 13 western European countries. It reviews the previous attempts to measure the macroeconomic effects of infrastructure investment which often suffer from an unresolved endogeneity problem. The production theory framework used explicitly includes the modeling of national transport intensities and the fact that transportation services depend on private capital investment and government investment in roads. The endogeneity bias is addressed by introducing an estimation breakdown which combines national productivity effects with overall productivity effects for the country group as a whole, to make residuals of the estimation orthogonal to the explanatory variables. Productivity is measured by the Toernquist productivity index. The productivity effects depend on the sign of the ratio of vehicle stock to the road stock elasticity of production. The fixed-effects panel data analysis shows that transportation infrastructure has a positive effect on macroeconomic productivity. The variance of road infrastructure investment in the panel explains, however, only a small part of the macroeconomic productivity development.

01020180

06-2210

English

19p

2006

Transportation Research Board 85th Annual Meeting

CD-ROM

Figures (4) ; References; Tables (3)

Budgeting; Highways; Infrastructure; Investments; Macroeconomics; Productivity; Resource allocation; Transportation planning

Private investment; Reassessment

Administration and Management; Design; Economics; Finance; Highways; I10: Economics and Administration; I20: Design and Planning of Transport Infrastructure

Transportation Research Board Annual Meeting 2006 Paper #06-2210

TRIS, TRB

Mar 3 2006 10:55AM