Transport Infrastructure Development, Public Performance and Long-Run Economic Growth: A Case Study for the Eu-28 Countries

This paper examines the link between the transport infrastructure and the economic performance in the EU-28 countries, over the period of time 2000–2014, using panel data methods. Firstly, we aim to provide the theoretical background of the transport infrastructure development, public sector performance and economic growth. The paper’s key point is the detailed look at the components of transport infrastructure, analyzing the implications of the policy-makers based on a production function and in order to test the policy implication, factor analysis is also employed. The results show significant effects from transport infrastructure components even after institutional and other factors are controlled for. From the path analysis results, the study confirm the alternative hypothesis, outlining the unidirectional long-run causality relationship between growth, transport infrastructure and Public Sector Performance. Transport infrastructure status (measured thought index of transport) has significant impact on economic development with coefficient estimate. The public performance indicators influence the way to economic growth. On the one hand, the corruption, the regulatory environment, size shadow economy, infant mortality, income inequality, inflation and unemployment rate negatively affect the economic growth, and on the other hand there is a strong positive relationship between the quality of the judiciary, education achievement, life expectancy and economic growth.