Integrating Network Analysis with the Production Function Approach to Study the Spillover Effects of Transport Infrastructure

Abstract

Álvarez-Ayuso I. C., Condeço-Melhorado A. M., Gutiérrez J. and Zofío J. L. Integrating network analysis with the production function approach to study the spillover effects of transport infrastructure, Regional Studies. The production function approach is used to analyse the role of transport infrastructure on regional gross domestic product (GDP) using new definitions and measures of road network capital stock that represent the real benefit obtained by regions when accessing markets. Improving the existing methodologies, the infrastructure stock is weighted with trade data so as to estimate the direct effects on production of a region's own infrastructure (what is termed here ‘internal stock’), as well as the spillover effects that it receives from using that of neighbouring regions (imported stock). The methodology is illustrated by using Spanish data for the 1980–2007 period and these internal and imported infrastructure stocks are calculated using geographical information system (GIS) network analysis based on generalized transportations costs. With this new data set, successive regressions are performed controlling for endogeneity and the obtained results are compared with those of previous research. The validity of this methodology and the existence of significant and rather large spillover effects that even outweigh the effect of the internally endowed capital stock on aggregate production are confirmed. On average, the relative magnitude of the spillover effects to that of the internal (own) stock effect increases with the level of territorial disaggregation, i.e., it is larger for provincial data than for regional data. Unfortunately, it is also found that spillover effects are asymmetric, exhibiting negative values for poorer regions, as they do not profit from the capital stock existing in their neighbouring areas as do their richer counterparts, thereby casting doubts on the cohesion effects attributed to transport infrastructure investments.