Transport investment, railway accessibility and their dynamic impacts on regional economic growth

Abstract

This paper examines the impact of large-scale transport investment and the resulting increase of accessibility on the Gross Domestic Product (GDP) in the Kingdom of Saudi Arabia (KSA). Spatial and temporal economic data for the 13 regions of the country from 1999 to 2018 are analyzed using static and dynamic panel data models. Both first difference GMM (Generalised Method of Moments) models and system GMM models fit the data satisfactorily, with system GMM models generally offering better modelling accuracies. The results show that the elasticity of the one-year lagged GDP variable is positive and statistically significant in all specifications considered, indicating the presence of a dynamic pattern toward economic growth. Generally, the value of transport investment for the one-year lag shows positive and significant statistical relationships with regional GDP among several specifications of the dynamic models. On the other hand, railway accessibility value presents positive and significant impact on GDP in two years lag. Our study finds that the impact of the monetary value of transport investment, in general, was manifested immediately in the following year. However, the railway accessibility improvement requires a period to deliver its benefits.