Economic impacts of road investments under different financing alternatives

This study explores the issue of road infrastructure funding, analyzing the impact of financing a road improvement project through tolls tariff charged from the final users vis-a-vis the financing through an increase in the country’s payroll tax rate. Using a transport model integrated to an interregional computable general equilibrium model this research simulated alternative arrangements for financing investments made at BR-040, Brazilian road granted by the Federal Government and which figured as the case study for this research. The results indicate that the way the investment is financed is relevant to the regionally distributed impacts of the project, being decisive in defining which regions are benefited by the improvement project. Analyzing the country’s aggregated results, the situation that has the greatest impact on the Brazilian's GDP growth is the investment payed by the road users through toll tariff. From a regional perspective, a clear area of influence that benefits from the improvements on the road can be identified and, when the costs for executing such improvements are shared with the whole country through a tax increase, these benefits are accentuated.