The influence of transportation infrastructure on economic development

This paper implements an improved methodology for estimating the effects of infrastructure spending on aggregate output and shows the results of previous studies to be biased end imprecise. previous studies have found the elasticity of aggregate output with respect to infrastructure spending to be in the 0.3 to 0.6 range. Literally hundreds of newspaper articles have referenced these specific results in discussing the need for Increased spending. Using a transfer function model which accounts for nonstationarity and serial correlation. we find the aggregate output elasticity of net nonmilitary public investment is about 0.03.