The contribution of transport infrastructure to economic activity: The case of Belgium

Abstract

The role of the expansion of transport infrastructure in stimulating economic growth in developed countries is not straightforward. This can lead to debates concerning public investments in transport infrastructure especially when public funds are scarce and the demand for investments is high in social sectors such as education, health and social care. However, it is hard to generalise the potential growth impact of transport infrastructure as it can differ over regions and will be affected by the presence or absence of other drivers of economic growth.As a case the situation in Belgium is considered. It is a small, open economy which is highly integrated into the world economy and facing a considerable growth in passenger, but especially in freight transport. Its geographical position and the presence or proximity of important ports and airports in combination with a dense road and rail network makes it one of the gateways of Europe. The transport and logistics sector generates considerable employment and added value. However, the dense population, the concentration of public administration in Brussels and the large amount of transit freight flows result in a large pressure on the existing transportation infrastructure which becomes more and more congested. The large traffic flows generate negative external effects for people, planet and profit. Opponents of further expansion of especially ports, airports, and roads often focus on the negative external effects on people and the planet as they call into question the positive effects on profit and economic growth.Based on aggregate growth modelling and a causality test, some error-correction models are estimated using annual data for Belgium. They reveal that for Belgium GDP per capita is not only positively impacted by traditional indicators such as the openness of the Belgian economy, the rate of investment as a whole, and technological change, but also by the length of the motorways, the rail network and the investments in port infrastructure. As a consequence the evaluation of new transport infrastructure projects should take into account this contribution to economic growth.