Roads to Prosperity? Assessing the Link Between Public Capital and Productivity
- 1 June 1999
- journal article
- Published by American Economic Association in American Economic Review
- Vol. 89 (3) , 619-638
- https://doi.org/10.1257/aer.89.3.619
Abstract
Does the positive correlation between infrastructure and productivity reflect causation? If so, in which direction? I find that when growth in roads (the largest component of infrastructure) changes, productivity growth changes disproportionately in U.S. industries with more vehicles. That vehicle-intensive industries benefit more from road-building suggests that roads are productive. At the margin, however, road investments do not appear unusually productive. Intuitively, the interstate system was highly productive, but a second one would not be. Road-building thus explains much of the productivity slowdown through a one-time, unrepeatable productivity boost in the 1950's and 1960's. (JEL E62, O47, R53)Keywords
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