Government Quality and the Economic Returns of Transport Infrastructure Investment in European Regions

43 Pages Posted: 16 Dec 2015

See all articles by Riccardo Crescenzi

Riccardo Crescenzi

London School of Economics & Political Science (LSE) - Department of Geography and Environment

Marco Di Cataldo

London School of Economics & Political Science (LSE) - Department of Geography and Environment; Ca' Foscari University of Venice, Department of Economics

Andrés Rodríguez-Pose

London School of Economics & Political Science (LSE) - Department of Geography and Environment

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Date Written: December 2015

Abstract

Transport infrastructure investment is a cornerstone of growth-promoting strategies. However, in the case of Europe the relevant literature is increasingly failing to find a clear link between infrastructure investment and economic performance. This may be a consequence of overlooking the role of government institutions. This paper assesses the connection between regional quality of government and the returns of different types of road infrastructure in EU regions during the period between 1995 and 2009. The results unveil a strong influence of regional quality of government on the economic returns of transport infrastructure. In weak institutional contexts, investments in motorways -- the preferred option by local governments -- yield significantly lower returns than the more humble but possibly more efficient secondary road. Government institutions also affect the returns of transport maintenance investment.

Keywords: economic growth, Europe, government quality, institutions, public capital investment, regions, transport infrastructure

JEL Classification: O43, R11, R40, R58

Suggested Citation

Crescenzi, Riccardo and Di Cataldo, Marco and Rodríguez-Pose, Andrés, Government Quality and the Economic Returns of Transport Infrastructure Investment in European Regions (December 2015). CEPR Discussion Paper No. DP10988, Available at SSRN: https://ssrn.com/abstract=2704482

Riccardo Crescenzi (Contact Author)

London School of Economics & Political Science (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Marco Di Cataldo

London School of Economics & Political Science (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Ca' Foscari University of Venice, Department of Economics ( email )

Cannaregio 873
Venice, Veneto 30121
Italy

Andrés Rodríguez-Pose

London School of Economics & Political Science (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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