Does Regional Infrastructure Investment Stimulate Extra Housing and Commercial Building Supply? Long-Run Evidence Across the English Regions

Abstract

This paper uses long-term regional construction data to investigate whether increases infrastructure investment in the English regions leads to subsequent rises in housebuilding and new commercial property, using time series modeling. Both physical (roads and harbours) and social infrastructure (education and health) impacts are investigated across nine regions in England. Significant effects for physical infrastructure are found across most regions and, also, some evidence of a social infrastructure effect. The results are not consistent across regions, which may be due to geographical differences and to network and diversionary effects. Also, results show interesting distinctions between residential and commercial real estate investment. The most important result for commercial investment suggests that the impact is more pronounced in areas of concentrated commercial investment. Overall, the results do suggest that infrastructure does have some impact but follows differential lag structures. These results provide a test of the hypothesis of the economic benefits of infrastructure investment in an approach that has not been used before.

Keywords: Regional Variation, Infrastructure Investment, Spill-over, Structural Break

JEL Classification: R11, R58, C32, H73