Network effects of public transport infrastructure: Evidence on Italian regions**We greatly benefited from valuable comments by Fabrizio Balassone, Sergio De Stefanis, Paolo Sestito, Andreas Stephan and other participants at seminars held in the Bank of Italy and at the 50° ERSA Congress held in Jönkoping (Sweden). We are grateful to Andrea Filippone for having provided updated private capital series. The responsibility for the contents of the paper rests with the authors and not with the Bank of Italy

In this paper we contribute to the empirical literature on the size of network effects of public infrastructures. A novel approach is introduced to this purpose. Moving from estimates of the common dynamics shared by the regional public capital stock series, identification of co†ordinated policy shocks is obtained within a properly specified structural vector error correction model. Our empirical findings confirm previous evidence that transport infrastructures exert positive effects in the long run. At the same time, we find evidence that this influence is mostly attributable to the impact of co†ordinated public policy shocks, as predicted by the literature on network externalities.