Estimating the Impacts of Transport Corridor Development in Kazakhstan : Applicationof Dynamic Panel Data Models to Firm Registry Data

Large-scale transport infrastructure investment can facilitate structural transformation bychanging firm behavior. Although its impact is evident over the long term, an important empirical challenge is potentialendogeneity of infrastructure placement. By using the dynamic panel data regression, the paper examines theimpacts of massive road corridor investment under the Nurly Zhol program in Kazakhstan. The paper takes advantage ofdetailed micro shipping data to capture historical changes in transport connectivity over the past 10 years. While theaverage travel speed has slightly increased, transport costs have been nearly halved. The estimated translog costfunctions indicate that local market accessibility is the most important factor to boost firm productivity. Theelasticity was 0.24 in absolute terms. Inventory is found to be a major cost factor for firms. It is found that a10-percent improvement in accessibility to large cities, such as Astana and Almaty, could allow firms to reduce theirinventory by 8.7 percent. The market accessibility is found to foster firm agglomerations, but agglomeration economiesdo not seem to translate into higher firm productivity. This is possibly because the Kazakh economy still lacks effectiveforward or backward linkages across industries.