Highway Infrastructure Investment and Regional Employment Growth: Dynamic Panel Regression Analysis
A number of macro-level studies attempting to establish the statistical link between public investment in highway infrastructure and employment have applied econometric techniques to estimate the effect of highways while controlling for the effects associated with other factors. Unfortunately, direct use of empirical findings from these historic and recent studies, in shaping transport policy and supporting particular investment decisions, has been rather limited by mixed and inconclusive evidence in the literature. Apart from the common differences among these studies in scope and methodology, another possible reason for the contradictory evidence is that much of the previous work has generally suffered from several methodology drawbacks. In many studies, for instance, several important determinants of employment growth are omitted, and the choices of control variables included in the estimated equations generally are not based on theory. Those studies based solely on cross-sectional data also typically do not account for unobserved regional heterogeneity that may explain spatial differences in employment changes. Moreover, the possibility that the causal relationship between transportation investment and economic growth could work in both directions is generally ignored. This paper attempts to shed some light on this controversy by analysing the effect of highway investment on county-level employment in the State of North Carolina, United States. We derive a reduced from model of equilibrium employment that considers the effects of highways and other potential factors on the supply and demand for labour. Given the potential for lagged responses of the labour market to any exogenous shock, we assume a partial adjustment process for actual employment in our empirical model. A panel data set for 100 North Carolina counties from 1985 to 1997 is used in order to control for unobserved county and time specific effects using panel regression techniques. We also address the causality issue by the use of a two-stage least squares procedure with an instrumental variable. Our main results are that the employment effect of highway infrastructure depends critically on model specifications considered, and failure to account for the dynamics of employment adjustment could lead to an upward bias in the estimated effect of highways.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mofidi, Alaeddin & Stone, Joe A, 1990. "Do State and Local Taxes Affect Economic Growth?," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 686-691, November.
- Robert Cervero & Mark Hansen, 2002. "Induced Travel Demand and Induced Road Investment: A Simultaneous Equation Analysis," Journal of Transport Economics and Policy, University of Bath, vol. 36(3), pages 469-490, September.
- Arellano, Manuel & Bover, Olympia, 1995.
"Another look at the instrumental variable estimation of error-components models,"
Journal of Econometrics,
Elsevier, vol. 68(1), pages 29-51, July.
- M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
- Haughwout, Andrew F., 1997. "Central city infrastructure investment and suburban house values," Regional Science and Urban Economics, Elsevier, vol. 27(2), pages 199-215, April.
- McDonald, John F. & Osuji, Clifford I., 1995. "The effect of anticipated transportation improvement on residential land values," Regional Science and Urban Economics, Elsevier, vol. 25(3), pages 261-278, June.
- Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
- David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
- Noland, Robert B., 2001. "Relationships between highway capacity and induced vehicle travel," Transportation Research Part A: Policy and Practice, Elsevier, vol. 35(1), pages 47-72, January.
- Helms, L Jay, 1985. "The Effect of State and Local Taxes on Economic Growth: A Time Series-Cross Section Approach," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 574-582, November.
- Bollinger, Christopher R. & Ihlanfeldt, Keith R., 2003. "The intraurban spatial distribution of employment: which government interventions make a difference?," Journal of Urban Economics, Elsevier, vol. 53(3), pages 396-412, May.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- R Blundell & Steven Bond, "undated". "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
- Richard Blundell & Steve Bond, 1999. "GMM estimation with persistent panel data: an application to production functions," IFS Working Papers W99/04, Institute for Fiscal Studies.
- Robert Noland & William Cowart, 2000. "Analysis of Metropolitan Highway Capacity and the growth in vehicle miles of travel," Transportation, Springer, vol. 27(4), pages 363-390, December.
- Carlino, Gerald A. & Voith, Richard, 1992. "Accounting for differences in aggregate state productivity," Regional Science and Urban Economics, Elsevier, vol. 22(4), pages 597-617, November.
- Gerald A. Carlino & Richard Voith, 1989. "Accounting for differences in aggregate state productivity," Working Papers 90-1, Federal Reserve Bank of Philadelphia.
- Mark, Stephen T. & McGuire, Therese J. & Papke, Leslie E., 2000. "The Influence of Taxes on Employment and Population Growth: Evidence from the Washington, D.C. Metropolitan Area," National Tax Journal, National Tax Association, vol. 53(n. 1), pages 105-24, March.
- Randall W. Eberts & Joe A. Stone, 1992. "Wage and Employment Adjustment in Local Labor Markets," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wea, 06.
- Daniel Graham, 2000. "Spatial Variation in Labour Productivity in British Manufacturing," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(3), pages 323-341.
- Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, "undated". "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Carroll, Robert & Wasylenko, Michael J., 1994. "Do State Business Climates Still Matter? -- Evidence of a Structural Change," National Tax Journal, National Tax Association, vol. 47(1), pages 19-37, March.
- Douglas R. Dalenberg & Mark D. Partridge & Dan S. Rickman, 1998. "Public Infrastructure: Pork or Jobs Creator?," Public Finance Review, , vol. 26(1), pages 24-52, January.
- Alfredo M. Pereira, 2000. "Is All Public Capital Created Equal?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 513-518, August. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa06p207. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier)
If references are entirely missing, you can add them using this form.