The gross domestic product (GDP) impact of transport investment has a strong resonance with policy. Investment in transport infrastructure is seen as one of the ways of growing economies and reducing spatial disparities. Economic growth is an objective of transport investment by international agencies such as the World Bank, the Asian Development Bank, as well as by the European Commission (EC) and national governments. The EC’s Cohesion Fund for 2014–2020 is €63.4 billion and has the objective of reducing spatial disparities in the EU and will either finance transport or renewable energy-oriented projects. Economic growth, particularly in the north thereby reducing spatial disparities, is a key objective of the High Speed 2 (HS2) and the Northern Powerhouse Rail high-speed lines in England.
When thinking about the GDP effects of such transport investment at a regional or country level, we need to consider how transport investments feed into the regional and national economies. In this paper, we therefore take the reader through the key macroeconomic mechanisms starting from neoclassical theory through to the more modern New Economic Geography (NEG) theory in Sections “Neoclassical Approaches,” “Endogenous Growth and New Economic Geography,” and “Transport-Economy Frictions.” In particular, we draw out the implications of transport investment on productivity growth and the displacement of economic activity. In Section “Evidence of Transport Investment’s Impact on the Economy,” we then present and discuss the evidence on how transport investment has effected the economy historically. We draw out variations by estimation approach, industry, mode, country, region, and income levels, and examine whether historical timing is of any relevance, before concluding in Section “Conclusions.”
Full paper:
LAIRD, J.J. and D.H. JOHNSON (2021). The GDP effects of transport investments: the macro-economic approach. In: VICKERMAN, R. (Eds) et al. Encyclopedia of Transportation. Elsevier.