Spatial Impacts of Endogenously Determined Infrastructure Investment
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We address three questions: Do infrastructure investments impact on local incomes, population and land values? Do these effects spill over into neighbouring regions? Is infrastructure investment a response to local developments? We outline a theoretical framework and estimate a simultaneous equation growth model of infrastructure investment, real incomes, population and land values. The model, estimated by spatial three-stage least squares, uses New Zealand functional labour market panel data. We find that infrastructure investment increases population and incomes, but is itself endogenously determined and subject to positive spatial spillovers. Thus a self-reinforcing cycle exists between local incomes and infrastructure investment.
KeywordsInfrastructure Economic growth Migration Land values
We thank seminar audiences at the University of St Andrews, University of Waikato, University of Auckland and Motu Economic and Public Policy Research for helpful comments on earlier versions. The authors, however, are solely responsible for the views expressed.
Funding This work was supported by the Foundation for Research, Science and Technology [MOTU-0601] and the Ministry of Business, Innovation and Employment [Resilient Urban Futures].
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