Highway capital expenditures and induced vehicle travel

Concas, Sisinnio (2012): Highway capital expenditures and induced vehicle travel.

Abstract

We investigate the effects of public capital investment on the demand for travel. We define capital stock as a productive flow that accounts for the physical deterioration of infrastructure over time. We present a framework where additions to capital stock only cover a portion of the long-run equilibrium level, and where policy decisions are dictated by expectations of economic and travel growth. To the extent that these investments increase productivity, they generate induced travel. Using a panel dataset at the state level for the period 1982-2005, we find that the elasticity of travel demand with respect to changes in state highway capital stock is equal to 0.041in the short run, while the long-run is 0.237. Our results show that changes in capital expenditures in response to past levels of traffic are characterized by a three-year lag, suggesting that the investment response to changes in travel is slow to converge to the desired long-run levels.

• Item Type: MPRA Paper
• Language: English
• Keywords: highway capital; public capital; capital accumulation; induced vehicle travel; induced vehicle miles of travel
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures ; Other Public Investment and Capital Stock; H - Public Economics > H4 - Publicly Provided Goods > H41 - Public Goods; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R4 - Transportation Economics; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models

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