A cross-region analysis of the output elasticity of transport investment in China

Abstract

This paper aims to investigate the linkage between transport investment and economic development. To achieve it, the contribution of transport investment stock to economic growth was measured using provincial panel data from 1990 to 2010 in China. Empirical result showed the contribution was indeed various across regions. The greatest contribution was found in the central region, followed by the western region and then the eastern region. The cross-region comparison indicated economic returns of extra transport investment were generally positive but their degrees were quite different in different development stages. More specifically, a large contribution was found in pre-policy and deepening stages for the eastern and western regions while it was found in pre-policy and primary stages for the central region. A moderate contribution was seen in deepening stage for the central region while it was seen in primary and expansion stages for the western region. Accordingly, China needs to allocate more transport investments in the central region due to its higher economic returns and important connection position. Additionally, as an extension, the positive impact of transport investment on regional economic growth in China can be taken as an experiment to be replicated by other developing or less-developed nations.