Transport Infrastructures and the Spillover Effects: Evidence from Spanish Manufacturing Industry



Transport Infrastructures and the Spillover Effects: Evidence from Spanish Manufacturing Industry

Authors

SANAU J, University of Zaragoza, Spain

Description

Infrastructure investment can increase the production of the economy by creating employment and increasing the demand of other productive sectors. On the other hand, an adequate stock of infrastructures can improve the competitiveness and encourage the gr

Abstract

Infrastructure investment can increase the production of the economy by creating employment and increasing the demand of other productive sectors. On the other hand, an adequate stock of infrastructures can improve the competitiveness and encourage the growth of an economy.

The first of these macroeconomic effects are related to the aggregate demand and disappear when the infrastructure has been finished. In contrast, the second effects are linked with the aggregate supply; they are found when the infrastructure starts working and last for a very long time.

In order to study the effects on growth, the approach of the public capital hypothesis has been used within which are distinguished:

- those research works that analise the influence of public capital on the production function 1

- those which estimate simultaneous equation models and/or dual functions 2.

The former estimate extended production functions, putting in relation the output of an economy with labor, private and public capital. In this context, it is assumed that public and private capital services are proportional to the value of their stocks, and it is admitted that public capital exerts an influence on production, both direct and indirectly (through the labor and physical capital marginal products). Most studies conclude that infrastructures improve the efficiency of the other factors, and therefore, the productivity and growth of economies. However, different opinions about the size of the effects have arisen, not only due to a lack of agreement on the notion of infrastructure -since it is usually identified with public capital, one which falls within Public Administration-, but also due to the problems involved in their measuring, and because different economies and periods have been studied with several theoretical models arid econometric techniques, which have not always been correctly applied.

In order to overcome the first type of problems Sanatl (1995a, 1995b) suggests a notion of infrastructure that takes into account the economic characteristics of these goods. According to Sanafi, infrastructures are "capital goods which enable the development of economic activities by rending final and intermediate use services". Moreover, the consumption of their services can be made in variable quantities, their demand being possible at times for a price. Given their public nature- not their public or private ownership-, they present indivisibility, economies of scale in their production and immobility. Finally, they all produce sinergic and spillover effects.

Following this definition, two types of infrastructures can be distinguished: economic and social. Economic infrastructures favour productive activities and the movement of economic goods; they have a direct impact on economic activity and on private factors productivity, conditioning the economic growth. Within this group are included transport infrastructures, (highways, harbours, airports, railroads...), those installations related to energy and water supplies, and telecommunication networks, categories known by the names of productive, material, technical, hard, core or physical infrastructures (in constituting what is currently known as public works). In order to quantify the effects of these categories the models based on the extended production function above mentioned can be estimated.

On the contrary, social infrastructures, such as education and health buildings, aim basically at the improvement of the labor factor and their effects can be seen in the very long-run. For this reason, their indirect link with economic activities is acknowledged. Most of the studies which have quantified the effects of these categories assuming that they are proportional to the value of their stocks have failed, because investments on these categories do not reflect the contribution of education and health to productivity or to economic growth. For their study the lines pointed out by Mankin, Romer & Weil (1992) can be followed. These authors modify the traditional specification of the production function, distinguishing human capital from physical capital (private capital and economic infrastructures).

According to this approach, the present study evaluates the impact of transport infrastructures on the Spanish manufacturing industry production during the period 1980-1992. The second section discusses the expected relationships among infrastructures and production and presents a theoretical model in which gross added value of manufacture is explained through the labor hours, private capital and infrastructure stocks value. A third section reports data sources and also outlines the procedures used to construct variables in this analysis. The fourth section considers the econometric issues and the results of several specifications. The fiveth section provides the main conclusions of the paper.

Publisher

Association for European Transport