Impact of Transport Infrastructure on Firm Formation

Abstract

This paper investigates the relationship between the availability of transport infrastructure and new plant openings in Portugal. The paper estimates an econometric model that uses plant-level data and geographic information systems to test whether denser motorway and railway networks have a positive effect on the formation of firms in Portuguese municipalities for various sectors of the economy. In addition to a study of the role of the own-municipality transport infrastructure, tests for the presence of spatial spillovers from the transport infrastructure were also conducted. The results suggest that both the railway and the motorway networks act as determinants of new plant openings. Expanding the local municipality railway and motorway networks by 10% can produce an increase in new plant openings from 0.9% to 2.7% and 0.7% to 2.6%, respectively. Positive spatial spillover effects from the transport infrastructure were also found: improving the motorway and railway networks of neighboring municipalities by 10% increases plant openings by from 2.7% to 5.1% and 2.4% to 6.7%, respectively.