The impact of roads on output at regional level
Date
2009-04
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Abstract
This paper intended to examine the relationship between regional road transport infrastructure and regional economic growth. It aimed to prove that transport infrastructure, roads and bridges can decrease transport costs and consequently lead to a higher level of output.
The study involved the 16 regions in the Philippines, their Gross Regional Domestic Product and the land infrastructure, particularly of roads and bridges in each region. The time frame of 11 years, from 1997 to 2007 was used. The production function was used as the model to estimate output. Explanatory variables for output per labor were capital per labor, labor, national roads and national bridges. The variables for infrastructure were lagged up to three years to account for simultaneity. Regressions that included instrumental variables were used as alternatives for lagging. Motor vehicle per land area, population per land area, poverty incidence among population and internal revenue allotment were the instruments for roads.
In most of the estimations, capital-labor ratio, employment, and national road density were positive and significant. National bridges on the other hand had a negative coefficient. Road density was positive and significant. Lagging road density decreased the coefficient and made it insignificant. With the ยท inclusion of all instrumental variables, road density was positive and significant.
This study was able to prove that roads contribute to output. High economic activity indicates high demand for roads. Thus, more roads are built where needed.
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Keywords
Urban planning, Road infrastructure, Infrastructure, Public infrastructure, Transport infrastructure