At a macroeconomic level, infrastructure and productivity are positively
correlated in the United States and other countries. However, it remains
unclear whether this correlation reflects causation, and if so, whether
causation runs from infrastructure to productivity, or the reverse. This paper
focuses on roads, and finds that vehicle-intensive industries benefit
disproportionately from road-building: when road growth changes, productivity
growth changes more in industries that are more vehicle intensive. These
results suggest that causation runs from infrastructure to productivity.
However, there is no evidence that at the margin, roads offer an above-average
return; road-building in essence offered a one-time boost to the level of
productivity in the 1950s and 1960s. Finally, it appears that congestion
significantly affects road-services at the margin, although congestion does
not appear important before 1973.
Full paper (3549 KB PDF)
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Last update: July 19, 2001