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 and is related to the fact that their financing involves payments of shadow tolls from the public budget to the private firms that constructed and operate them. In this context, the introduction of tolls has been suggested. Our results deal directly with the conceptual adequacy and the financial necessity of such tolls. Our first 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 three-quarters 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. The importance of spillovers suggests that the conceptual argument for the introduction of tolls is weak. Our second 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. Accordingly, the introduction of tolls is not necessary from a financial perspective.
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Paper provided by Department of Economics, College of William and Mary in its series Working Papers with number
37.
Find related papers by JEL classification: C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures R53 - Urban, Rural, and Regional Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock
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