In the early 1990s, academic research proposing a vital connection between public infrastructure investment and "productivity growth rate" coincided with an economic recession, sparking great interest in the potential for investment in transportation as a way to spur economic growth. However, the strong claims of the initial research, put forward most notably by David Aschauer, now of Bates College, and later by Alicia Munnell of the Boston Federal Reserve Bank, came under attack in the research community. Plans to dramatically increase public infrastructure spending instead bowed to pressures to reduce the sizable federal budget deficit. With the decade drawing to a close, national fiscal pressures have been relieved, yet researchers still grapple to reach a consensus on the effects of transportation investment on the economy. On February 23, 1999, 35 academic, government, and private-sector leaders met in Washington, DC, to discuss the importance of transportation investment for the future of the American economy. The one-day conference, sponsored by the Eno Transportation Foundation, focussed on two issues: (i) improving the tools used in the economic analysis of the relationship between transportation investment and growth; and (ii) Improving ways to communicate findings to policy makers and the public. Ishaq Nadiri of New York University and the National Bureau of Economic Research presented the results of his most recent national study, Contributions of' Highway Capital to Output and Productivity Growth in the U.S. Economy and Industries. This work offers solid support for the value of transportation investment. Analysing the costs of 35 different industry groups over a 40-year period, Nadiri finds that greater investment in transportation infrastructure leads to lower business costs in almost all of the industries studied. The average rate of return for these transportation investments throughout the study period is at or above the average rate of return for private-sector investments. The corresponding implication is that the government's expenditure of tax money on transportation infrastructure has been an economically worthwhile activity. However, the most recent average returns have been the smallest of the past 40 years, indicating that the current highway system may have reached maturity. Ishaq Nadiri and the forum participants identified several areas for future research. While Nadiri's study effectively captured the national effects of building the Interstate Highway System, the effect of such investment on a more local scale needs to be analysed. One important area for future research is to incorporate the level of use of transportation infrastructure into studies. Trucking deregulation, enacted in the early 1980s, and increases in traffic congestion are believed to have profound effects on the use and value of roads and highways. But these effects have not been fully measured. Understanding the importance of capacity utilization will go a long way to clarifying the benefits of new policies such as the intelligent vehicle highway system ("smart highways") or research and development of other capacity-enhancing developments. (A)
Abstract