The broader effects of transportation infrastructure: Spatial econometrics and productivity approaches

The importance of ‘broader’ economic effects of transportation infrastructure has recently become apparent. ‘Broader’ refers to impacts beyond the geographic boundaries within which the infrastructure investments are undertaken. Approaches to estimate ‘broader’ impacts in production and cost function models are evaluated. A contribution of this paper is the empirical demonstration with a cross-section of US states' manufacturing data that ignoring broader effects of a spatially lagged dependent variable can lead to mis-statements of the overall productive impacts of public infrastructure. These inaccuracies can arise because of missing indirect effects and from specification bias that may directly impact the infrastructure elasticity.