Abstract:

This paper examines the contribution of highway capacity expansions towards regional economic development in the United States. Using data for the 48 contiguous US states from 1984 to 2005, the dynamic production function estimates reveal that increases in overall highway capacity in states can have a positive and long-lasting effect on private sector output. However, both short-run and long-run output elasticities of highways are small. The data suggests that further investments in highway infrastructure may not produce sizable economic returns. It is roughly estimated that a 1 US dollar increase in expanding capacity for interstate highways could lead to a 0.15 US dollar increase in private sector output in the long run, which would take more than a decade. The estimates of the long-term productivity benefits of capacity expansion are found to be even smaller for lane-mile additions of lower functional road categories

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Appeared or available online: October 6, 2011

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