| Abstract: | Economic development is increasingly used by state DOT's as a criterion in arriving at highway funding decisions. However, there exists little evidence in the literature justifying the use of such a criterion, especially since existing techniques only determine correlations between highways and development. In this paper a time-series methodology is developed to differentiate the effects of highways on development from the effects of development on highways. This methodology includes structural plot analysis and causality tests and is based on pooled time-series and cross-sectional data on highway construction expenditures and county employment. The results indicate that increases in highway expenditures do not, in general, lead to statewide increases in employment other than temporary increases in the year of construction. However, in counties that are economic centers of the state, highway expenditures do have a positive long-term effect, i.e. employment increases above the normal trend of the economy. Such gains are apparently counterbalanced by employment losses in counties adjacent to the economic centers. |
