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Roads to Prosperity? Assessing the Link Between Public Capital and Productivity

1999; American Economic Association; Volume: 89; Issue: 3 Linguagem: Inglês

10.1257/aer.89.3.619

1944-7981

John G. Fernald,

Local Government Finance and Decentralization

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)