Highway capital expenditures and induced vehicle travel
AbstractWe investigate the effects of public capital investment on the demand for travel. We define capital stock as a productive flow that accounts for the physical deterioration of infrastructure over time. We present a framework where additions to capital stock only cover a portion of the long-run equilibrium level, and where policy decisions are dictated by expectations of economic and travel growth. To the extent that these investments increase productivity, they generate induced travel. Using a panel dataset at the state level for the period 1982-2005, we find that the elasticity of travel demand with respect to changes in state highway capital stock is equal to 0.041in the short run, while the long-run is 0.237. Our results show that changes in capital expenditures in response to past levels of traffic are characterized by a three-year lag, suggesting that the investment response to changes in travel is slow to converge to the desired long-run levels.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 40757.
Date of creation: 01 Aug 2012
Date of revision: 12 Aug 2012
highway capital; public capital; capital accumulation; induced vehicle travel; induced vehicle miles of travel;
Find related papers by JEL classification:
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Systems
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-03 (All new papers)
- NEP-PBE-2012-09-03 (Public Economics)
- NEP-TRE-2012-09-03 (Transport Economics)
- NEP-URE-2012-09-03 (Urban & Real Estate Economics)
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