On the regional incidence of public investment in highways in the USA

The objective of this paper is to investigate the regional incidence of the aggregate effects of public investment in highways in the US taking into consideration the possible existence of regional spillovers. The empirical results are based on VAR estimates at both the aggregate and state levels using private output, employment, and investment, as well as different measures of public investment. Empirical results allow us to establish several stylized facts. First, public investment in highways affects private sector variables positively at the aggregate level as well as in most states. Second, overall, the spillover effects of public investment in highways are at least 80% of the total effects for all private sector variables. Third, the spillovers have a clear geographical pattern in that they tend to be more important in western states and the corridor between the Great Lakes and the Gulf Coast. Fourth, we find that relative to their share of the US private sector variables, the biggest beneficiaries of public investment in highways tend to be the largest states in the country. This suggests that public investment in highways has contributed to concentration of private sector activity in the largest states