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

Abstract

Transport infrastructure investment is a cornerstone of growth‐promoting strategies. However, the link between infrastructure investment and economic performance remains unclear. 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 the regions of the European Union. The results unveil the influence of regional quality of government on the economic returns of transport infrastructure. In weak institutional contexts, investment in motorways — the preferred option by governments — yields significantly lower returns than the more humble secondary road. Government institutions also affect the returns of transport maintenance investment.