Infrastructure and regional development

This chapter deals with the impact of infrastructure on regional output, productivity and welfare, focusing on transport infrastructure. After discussing definitions, measurement and impact of infrastructure in general terms, the empirical literature on the productivity effects of infrastructure is reviewed in detail. Important themes are the specification of services provided with infrastructure, spatial spillovers, and, in particular, the rapidly growing literature dealing with causality issues. The chapter then shifts the focus from the macro to the micro perspective and from gross domestic producy effects to welfare effects. Spatial computable equilibrium modelling is introduced as an advanced technique for assessing regional welfare as well as distributional effects of infrastructure. However, this technique is data demanding; reliable parameters are often lacking, and the underlying theory is typically not tested. Gravity analysis is presented as a simplified, though well micro-founded alternative. Final thoughts are devoted to the widely discussed issue of wider economic effects that traditional evaluation methods typically do not account for