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On the Regional Incidence of Public Investment in Highways in the USA

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Author Info
Alfredo M. Pereira () (Department of Economics, College of William and Mary)
Jorge M. Andraz () (Faculdade de Economia, Universidade do Algarve)

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Abstract

The objective of this paper is to investigate the regional incidence of the aggregate effects of public investment in highways in the US taking into consideration the possible existence of regional spillovers. The empirical results are based on VAR estimates at both the aggregate and state levels using private output, employment, and investment, as well as different measures of public investment. Empirical results allow us to establish several stylized facts. First, public investment in highways affects private sector variables positively at the aggregate level as well as in most states. Second, overall, the spillover effects of public investment in highways are at least 80% of the total effects for all private sector variables. Third, the spillovers have a clear geographical pattern in that they tend to be more important in western states and the corridor between the Great Lakes and the Gulf Coast. Fourth, we find that relative to their share of the US private sector variables, the biggest beneficiaries of public investment in highways tend to be the largest states in the country. This suggests that public investment in highways has contributed to concentration of private sector activity in the largest states.

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Publisher Info
Paper provided by Department of Economics, College of William and Mary in its series Working Papers with number 70.

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Length: 36 pages
Date of creation: 14 Jan 2008
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Handle: RePEc:cwm:wpaper:70

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Related research
Keywords: public investment highway investment regional spillovers

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
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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  1. Alfredo M. Pereira & Jorge M. Andraz, 2004. "Public highway spending and state spillovers in the USA," Applied Economics Letters, Taylor and Francis Journals, vol. 11(12), pages 785-788, October. [Downloadable!] (restricted)
  2. Shah, Anwar, 1992. "Dynamics of Public Infrastructure, Industrial Productivity and Profitability," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 28-36, February. [Downloadable!] (restricted)
  3. Munnell, Alicia H, 1992. "Infrastructure Investment and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 189-98, Fall. [Downloadable!] (restricted)
  4. Douglas Holtz-Eakin & Amy Ellen Schwartz, 1995. "Spatial Productivity Spillovers from Public Infrastructure: Evidence from State Highways," NBER Working Papers 5004, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Seitz, Helmut, 1994. "Public capital and the demand for private inputs," Journal of Public Economics, Elsevier, vol. 54(2), pages 287-307, June. [Downloadable!] (restricted)
  6. Berndt, Ernst R & Hansson, Bengt, 1992. " Measuring the Contribution of Public Infrastructure Capital in Sweden," Scandinavian Journal of Economics, Blackwell Publishing, vol. 94(0), pages S151-68, Supplemen.
  7. Alicia H. Munnell & Leah M. Cook, 1990. "How does public infrastructure affect regional economic performance?," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 11-33.
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  8. Alfredo M. Pereira & Martin B. Schmidt, 2007. "Structural Breaks in Public Infrastructure Investment in the U.S," Working Papers 55, Department of Economics, College of William and Mary. [Downloadable!]
  9. Haughwout, Andrew F., 2002. "Public infrastructure investments, productivity and welfare in fixed geographic areas," Journal of Public Economics, Elsevier, vol. 83(3), pages 405-428, March. [Downloadable!] (restricted)
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  10. Rudebusch, Glenn D, 1998. "Do Measures of Monetary Policy in a VAR Make Sense?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 907-31, November.
    Other versions:
  11. Holtz-Eakin, D., 1988. "Private Output, Government Capital, And The Infrastructure Crisis," Discussion Papers 1988_08, Columbia University, Department of Economics.
  12. Evans, Paul & Karras, Georgios, 1994. "Are Government Activities Productive? Evidence from a Panel of U.S. States," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 1-11, February. [Downloadable!] (restricted)
  13. 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. [Downloadable!] (restricted)
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  14. Alicia H. Munnell, 1990. "Why has productivity growth declined? Productivity and public investment," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
  15. Duffy-Deno, Kevin T. & Eberts, Randall W., 1991. "Public infrastructure and regional economic development: A simultaneous equations approach," Journal of Urban Economics, Elsevier, vol. 30(3), pages 329-343, November. [Downloadable!] (restricted)
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  16. Christiano, Lawrence J & Eichenbaum, Martin & Evans, Charles, 1996. "The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 16-34, February. [Downloadable!] (restricted)
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  17. 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. [Downloadable!] (restricted)
  18. Laura S. Rubin, 1991. "Productivity and the public capital stock: another look," Working Paper Series / Economic Activity Section 118, Board of Governors of the Federal Reserve System (U.S.).
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