Spatial Dynamics in the Urban Century
New Horizons in Regional Science series
Edited by Karima Kourtit, Peter Nijkamp and Roger R. Stough
Chapter 9: Exploring surface transportation impact on economic output: a panel Granger causality test
Economic impact analysis of surface transportation infrastructure has long been an important task for policy makers and academic scholars. A valid knowledge of the linkage between surface transportation infrastructure and economic output not only helps researchers to achieve valid economic impact assessment, it also enables decision makers to develop the right infrastructure investment policies so as to generate greater economic benefits. In the past decades, literature on this topic has expanded exponentially since the milestone studies by Aschauer (1989, 1990, 1994), who found that public infrastructure has a strong positive impact on economic output. However, later studies found that actual impact is much less significant or even insignificant (Gramlich, 1994; Harmatuck, 1996; Nadiri and Mamuneas, 1996; Boarnet, 1997; Fernald, 1999; Boarnet and Haughwout, 2000; Gramlich, 2001). One of the major arguments that question the validity of these studies indicates that many studies are conducted without specifying the causal relationship (identification problem) between infrastructure and economic output (Gramlich, 1994; Kessides, 1993). On the one hand, surface transportation infrastructure enhances connections of regional transportation networks, which subsequently facilitates both freight and passenger movements by reducing the generalized transportation cost.
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