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Estimating the social return to transport infrastructure: A price-difference approach applied to a quasi-experiment

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  • Li, Zhigang
  • Chen, Yu

Abstract

Using the price differences between two markets, this study proposes a method for inferring the social return to transport infrastructure (in the vein of Fogel (1964)). We apply this approach to an investment that increased the shipping capacity of a thousand-mile-long railroad in western China. The event was quasi-experimental: before the expansion, the railroad was congested in one direction, but not the other. We find that, after the investment, (1) the between-destination price differences of goods shipped in the congestion direction dropped by about 30% and (2) shipping volume increased by around 40%. In contrast, those of goods in the other direction were not affected. These estimates imply a sizable social return to this particular investment: 10% per year in the most conservative case considered.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 41 (2013)
Issue (Month): 3 ()
Pages: 669-683

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Handle: RePEc:eee:jcecon:v:41:y:2013:i:3:p:669-683

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Web page: http://www.elsevier.com/locate/inca/622864

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Keywords: Infrastructure investment; Inter-regional trade; China;

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Cited by:
  1. Li, Han & Li, Zhigang, 2013. "Road investments and inventory reduction: Firm level evidence from China," Journal of Urban Economics, Elsevier, Elsevier, vol. 76(C), pages 43-52.

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