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On the economic and budgetary effects of investments in SCUTS: the Portuguese toll-free highways

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  • Alfredo Pereira

    ()

  • Jorge Andraz

    ()

Abstract

This paper provides empirical evidence on the economic and budgetary effects of the recent investments in toll-free highways in Portugal, the so-called SCUTS, in an effort to bring some clarity to the current policy debate on these highways. This debate is centered on the issue of the financial sustainability of these highways for the public sector and is derived from the fact that their financing through public-private partnerships and shadow tolls involves regular payments from the public budget to the private firms operating them. In this context, the introduction of tolls has been suggested as a mechanism to alleviate possible budgetary pressures. Our first main conclusion is that investments in SCUTS have positive economic effects in all regions of the country. Furthermore, we find that regional spillovers account for about threequarters of the total effects of these investments. A paradigmatic case is Lisbon, a region that captures the greatest share of these effects without any investments having actually occurred in the region itself. Our second main conclusion is that investments in SCUTS do not seem to generate problems of financial sustainability for the public budget. We estimate that for all SCUTS, the equilibrium tax rate, i.e., the rate that would balance the tax revenues induced by these highways and the shadow tolls the government has to pay, is lower than the effective tax rate for the economy. As a corollary and from a policy standpoint our results suggest that the introduction of tolls is questionable from a conceptual perspective due to the magnitude of spillovers and seems to be unnecessary from a financial perspective.

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File URL: http://hdl.handle.net/10.1007/s00168-010-0404-6
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Bibliographic Info

Article provided by Springer in its journal The Annals of Regional Science.

Volume (Year): 48 (2012)
Issue (Month): 1 (February)
Pages: 321-338

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Handle: RePEc:spr:anresc:v:48:y:2012:i:1:p:321-338

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Related research

Keywords: C32; H54; R53;

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References

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  1. Glenn D. Rudebusch, 1996. "Do measures of monetary policy in a VAR make sense?," Working Papers in Applied Economic Theory 96-05, Federal Reserve Bank of San Francisco.
  2. Gonzalo, Jesús & Lee, Tae-Hwy, . "Pitfalls in testing for long run relationships," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/753, Universidad Carlos III de Madrid.
  3. Engel, Eduardo & Fischer, Ronald & Galetovic, Alexander, 2008. "The Basic Public Finance of Public-Private Partnerships," Working Papers 35, Yale University, Department of Economics.
  4. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 1994. "The effects of monetary policy shocks: evidence from the flow of funds," Proceedings, Federal Reserve Bank of Dallas, issue Apr.
  5. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc.
  6. Rudebusch, Glenn D, 1998. "Do Measures of Monetary Policy in a VAR Make Sense? A Reply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 943-48, November.
  7. Alfredo Pereira & Jorge Andraz, 2006. "Public investment in transportation infrastructures and regional asymmetries in Portugal," The Annals of Regional Science, Springer, vol. 40(4), pages 803-817, December.
  8. Alfredo Pereira & Jorge Andraz, 2004. "Public highway spending and state spillovers in the USA," Applied Economics Letters, Taylor and Francis Journals, vol. 11(12), pages 785-788.
  9. Alfredo M. Pereira & Jorge M. Andraz, 2005. "Public Investment in Transportation Infrastructure and Economic Performance in Portugal," Review of Development Economics, Wiley Blackwell, vol. 9(2), pages 177-196, 05.
  10. Alfredo M. Pereira, 2000. "Is All Public Capital Created Equal?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 513-518, August.
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Cited by:
  1. Alfredo Marvão Pereira & Jorge M. Andraz, 2011. "On the economic effects of public infrastructure investment:A survey of the international evidence," Working Papers 108, Department of Economics, College of William and Mary.

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