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Highway capital expenditures and induced vehicle travel

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  • Concas, Sisinnio

Abstract

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.

Suggested Citation

  • Concas, Sisinnio, 2012. "Highway capital expenditures and induced vehicle travel," MPRA Paper 40757, University Library of Munich, Germany, revised 12 Aug 2012.
    • Handle: RePEc:pra:mprapa:40757
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    References listed on IDEAS

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    Cited by:

    1. Bucsky, Péter & Juhász, Mattias, 2022. "Long-term evidence on induced traffic: A case study on the relationship between road traffic and capacity of Budapest bridges," Transportation Research Part A: Policy and Practice, Elsevier, vol. 157(C), pages 244-257.
    2. Angarita-Zapata Juan S. & Parra-Valencia Jorge A. & Andrade-Sosa Hugo H., 2016. "Understanding the Structural Complexity of Induced Travel Demand in Decision-Making: A System Dynamics Approach," Organizacija, Paradigm, vol. 49(3), pages 129-143, August.
    3. Dimitropoulos, Alexandros & Oueslati, Walid & Sintek, Christina, 2018. "The rebound effect in road transport: A meta-analysis of empirical studies," Energy Economics, Elsevier, vol. 75(C), pages 163-179.

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    Keywords

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    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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