Transportation strongInfrastructurestrong, Productivity, and Externalities.pdfVIP

Transportation Infrastructure, Productivity, and Externalities Charles R. Hulten University of Maryland and National Bureau of Economic Research August, 2004 Revised February, 2005 ABSTRACT This paper summarizes the results of three studies linking investment in highway infrastructure to productivity growth in the manufacturing sector of the U.S., Spanish, and Indian economies. The goal of this research is (1) to trace the overall impact of highway investment on the growth of this strategic sector, (2) to examine the interregional effects of such investments, with particular attention to the issue of whether highway investment encourages regional convergence and relocation of economic activity, and (3) to assess the extent of the spillover externalities on manufacturing industry associated with such investments. This last issue is of particular importance for infrastructure policy, since spillover externalities tend to go uncounted in formal project investment analyses, leading to the possibility of under-investment. The comparative study of three countries at different stages of economic development using virtually the same model allows a fourth issue to be examined: the possibility that the effects of infrastructure investment differ according to the level of development and the extent to which existing infrastructure networks have already been built up. These issues are first framed in the larger context of the literature on infrastructure and productivity. Paper prepared for the 132nd Round Table of the European Conference of Ministers of Transport, at the Joint OECD/EMCT Transport Research Center, Paris, France, December 2 and 3, 2004.