Highway capital expenditures and induced vehicle travel
We 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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| Date of creation: | 01 Aug 2012 |
| Date of revision: | 12 Aug 2012 |
| Handle: | RePEc:pra:mprapa:40757 |
| Contact details of provider: | Postal: Ludwigstraße 33, D-80539 Munich, Germany Phone: +49-(0)89-2180-2459 Fax: +49-(0)89-2180-992459 Web page: https://mpra.ub.uni-muenchen.de More information through EDIRC
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References listed on IDEAS
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