Economic impacts of transportation infrastructure investment across countries: An empirical analysis

Bismark Richard Delaidem Kofi Agbelie, Purdue University


The motivation for the present study was to investigate the economic impact of transportation infrastructure investment and the extent of existing infrastructure development in a cross country context. The random parameters model using the Translog production function was found to best account for unobserved heterogeneity across countries. Historical data from countries in Asia, Australia, Europe, North America and South America for the period 1992 to 2010 were considered. The dependent variable selected for final modeling framework was the natural logarithm of real gross domestic product per capita. The statistically significant independent variables included highway (railway) infrastructure investment per kilometer of highway (2010$/km), highway (railway) infrastructure density (in kilometers per square kilometers of land area), employment rate (%), foreign direct investment per capita (2010$), percentage of industrial sector's contribution to GDP and percentage of service sector's contribution to GDP. The transportation-related estimated parameters showed an inelastic relationship with economic output. A 10% increase in highway (railway) infrastructure investment had economic output increased by 2.27% (0.23%) to 5.90% (0.94%) across countries. Furthermore, a 10% increase in highway (railway) infrastructure density increased economic output by 2.27% (0.21%) to 5.90% (3.29%) across countries. While railway infrastructure investment positively impacted the economy, it generated a lower economic impact compared to highway. Also, the economic impact of highway infrastructure density was approximately 3 times higher than the impact from railway infrastructure density. For highways, the maximum impact was experienced after about a year of investment, while for railways, the time lag was about 2 years. While these average results are limited to only within the scope of the countries considered for the given dataset and period of analysis, the information can be useful in shaping transportation investment policies in a countrywide context. The analysis can be enhanced with reliable and consistent data from a wider spectrum of countries with varying economic conditions, and transportation infrastructure condition, extent, and use along with investment categories.




Sinha, Purdue University.

Subject Area

Economics|Civil engineering|Transportation planning

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