IDEAS home Printed from https://ideas.repec.org/a/eee/transa/v100y2017icp319-336.html
   My bibliography  Save this article

Transport infrastructure, economic development and urbanization in India (1990–2011): Is there any causal relationship?

Author

Listed:
  • Maparu, Tuhin Subhra
  • Mazumder, Tarak Nath

Abstract

Development of transport infrastructure has long been taken as a major tool in promoting economic development and urbanization of a region. However, it is quite debatable whether transport infrastructure promotes economic development and urbanization, or economic development and urbanization create demand first which leads to investment in transport infrastructure. Each of the views has theoretical support. Therefore, apart from theory, empirical evidence is required to establish direction of causality, which bears serious policy implications. This study looks into different sub-sectors of transport infrastructure to find its long-run relationship and direction of causality with economic development and urbanization. It first finds the order of integration of the variables and then tries to find their causal relationship using cointegration and Granger causality test approach for India between 1990 and 2011. It uses Vector Auto-Regression and Vector Error Correction model to find short-run and long-run causality. Results showed existence of long-run relationship between transport infrastructure and economic development, and the direction of causality is from economic development to transport infrastructure in most of the cases, thus drawing support in favor of Wagner’s law.

Suggested Citation

  • Maparu, Tuhin Subhra & Mazumder, Tarak Nath, 2017. "Transport infrastructure, economic development and urbanization in India (1990–2011): Is there any causal relationship?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 100(C), pages 319-336.
    • Handle: RePEc:eee:transa:v:100:y:2017:i:c:p:319-336
    DOI: 10.1016/j.tra.2017.04.033
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0965856416303299
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tra.2017.04.033?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fujita , Masahisa & Krugman, Paul, 2004. "The new economic geography: Past, present and the future," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 4, pages 177-206.
    2. Adolph Wagner, 1958. "Three Extracts on Public Finance," International Economic Association Series, in: Richard A. Musgrave & Alan T. Peacock (ed.), Classics in the Theory of Public Finance, pages 1-15, Palgrave Macmillan.
    3. Mesbah Motamed & Raymond Florax & William Masters, 2014. "Agriculture, transportation and the timing of urbanization: Global analysis at the grid cell level," Journal of Economic Growth, Springer, vol. 19(3), pages 339-368, September.
    4. Gebhard Kirchgässner & Jürgen Wolters & Uwe Hassler, 2013. "Introduction to Modern Time Series Analysis," Springer Texts in Business and Economics, Springer, edition 2, number 978-3-642-33436-8, October.
    5. Muhammad Shahbaz & Rashid Sbia & Helmi Hamdi & Ilhan Ozturk, 2014. "Economic growth, electricity consumption, urbanization and environmental degradation relationship in United Arab Emirates," Post-Print halshs-01902764, HAL.
    6. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    7. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    8. Pandey, S M, 1977. "Nature and Determinants of Urbanization in a Developing Economy: The Case of India," Economic Development and Cultural Change, University of Chicago Press, vol. 25(2), pages 265-278, January.
    9. Cain, Louis P., 1997. "Historical perspective on infrastructure and US economic development," Regional Science and Urban Economics, Elsevier, vol. 27(2), pages 117-138, April.
    10. Kala Seetharam Sridhar & A. Venugopala Reddy, 2011. "Investment and Economic Opportunities: Urbanization, Infrastructure and Governance in The North and South of India," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 18(1), pages 1-46, June.
    11. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    12. T. Ravi Kumar, 2002. "The Impact of Regional Infrastructure Investment in India," Regional Studies, Taylor & Francis Journals, vol. 36(2), pages 194-200.
    13. Shahbaz, Muhammad & Lean, Hooi Hooi, 2012. "Does financial development increase energy consumption? The role of industrialization and urbanization in Tunisia," Energy Policy, Elsevier, vol. 40(C), pages 473-479.
    14. Ghosh, Sajal & Kanjilal, Kakali, 2014. "Long-term equilibrium relationship between urbanization, energy consumption and economic activity: Empirical evidence from India," Energy, Elsevier, vol. 66(C), pages 324-331.
    15. Pravakar Sahoo & Ranjan Kumar Dash, 2012. "Economic growth in South Asia: Role of infrastructure," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(2), pages 217-252, January.
    16. Alberto F. Ades & Edward L. Glaeser, 1999. "Evidence on Growth, Increasing Returns, and the Extent of the Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 1025-1045.
    17. Fan, Shenggen & Chan-Kang, Connie, 2008. "Regional road development, rural and urban poverty: Evidence from China," Transport Policy, Elsevier, vol. 15(5), pages 305-314, September.
    18. E.B. Kibalov & (kibalovE@mail.ru) & A.A. Kin (kin_a@ieie.nsc.ru), 2013. "On Issues of Reforming Russian Railway Transport," Journal "Region: Economics and Sociology", Institute of Economics and Industrial Engineering of Siberian Branch of RAS, vol. 1.
    19. Blane D. Lewis, 2014. "Urbanization and Economic Growth in Indonesia: Good News, Bad News and (Possible) Local Government Mitigation," Regional Studies, Taylor & Francis Journals, vol. 48(1), pages 192-207, January.
    20. Herranz-Loncan, Alfonso, 2007. "Infrastructure investment and Spanish economic growth, 1850-1935," Explorations in Economic History, Elsevier, vol. 44(3), pages 452-468, July.
    21. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    22. Akitoby, Bernardin & Clements, Benedict & Gupta, Sanjeev & Inchauste, Gabriela, 2006. "Public spending, voracity, and Wagner's law in developing countries," European Journal of Political Economy, Elsevier, vol. 22(4), pages 908-924, December.
    23. Pradhan, Rudra P. & Bagchi, Tapan P., 2013. "Effect of transportation infrastructure on economic growth in India: The VECM approach," Research in Transportation Economics, Elsevier, vol. 38(1), pages 139-148.
    24. Moomaw, Ronald L. & Shatter, Ali M., 1996. "Urbanization and Economic Development: A Bias toward Large Cities?," Journal of Urban Economics, Elsevier, vol. 40(1), pages 13-37, July.
    25. Yeşim Kuştepeli & Yaprak Gülcan & Sedef Akgüngör, 2012. "Transportation infrastructure investment, growth and international trade in Turkey," Applied Economics, Taylor & Francis Journals, vol. 44(20), pages 2619-2629, July.
    26. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    27. Michael Bleaney & Norman Gemmell & Richard Kneller, 2001. "Testing the endogenous growth model: public expenditure, taxation, and growth over the long run," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 34(1), pages 36-57, February.
    28. Marazzo, Marcial & Scherre, Rafael & Fernandes, Elton, 2010. "Air transport demand and economic growth in Brazil: A time series analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(2), pages 261-269, March.
    29. Xavier Sala-I-Martin, 1997. "Transfers, Social Safety Nets, and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 81-102, March.
    30. Pravakar Sahoo & Ranjan Kumar Dash & Geethanjali Nataraj, 2012. "China¡¯S Growth Story: The Role Of Physical And Social Infrastructure," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 37(1), pages 53-75, March.
    31. Fedderke, J.W. & Perkins, P. & Luiz, J.M., 2006. "Infrastructural investment in long-run economic growth: South Africa 1875-2001," World Development, Elsevier, vol. 34(6), pages 1037-1059, June.
    32. Brutzkus, Eliezer, 1975. "Centralized versus Decentralized Pattern of Urbanization in Developing Countries: An Attempt to Elucidate a Guideline Principle," Economic Development and Cultural Change, University of Chicago Press, vol. 23(4), pages 633-652, July.
    33. Bert F. Hoselitz, 1953. "The Role of Cities in the Economic Growth of Underdeveloped Countries," Journal of Political Economy, University of Chicago Press, vol. 61(3), pages 195-195.
    34. Sharif Hossain, Md., 2011. "Panel estimation for CO2 emissions, energy consumption, economic growth, trade openness and urbanization of newly industrialized countries," Energy Policy, Elsevier, vol. 39(11), pages 6991-6999.
    35. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    36. Rudra P. Pradhan, 2010. "Modelling the Nexus between transport infrastructure and economic growth in India," International Journal of Management and Decision Making, Inderscience Enterprises Ltd, vol. 11(2), pages 182-196.
    37. MehrdadBisadi & ShahrizanBaharom, 2013. "Moving Load Analysis on Skewed Railway Bridge," Journal of Asian Scientific Research, Asian Economic and Social Society, vol. 3(2), pages 198-203, February.
    38. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    39. Narayan, Seema & Rath, Badri Narayan & Narayan, Paresh Kumar, 2012. "Evidence of Wagner's law from Indian states," Economic Modelling, Elsevier, vol. 29(5), pages 1548-1557.
    40. Shruti Tripathi & Vikash Gautam, 2010. "Road Transport Infrastructure and Economic Growth in India," Journal of Infrastructure Development, India Development Foundation, vol. 2(2), pages 135-151, December.
    41. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    42. Somik Lall, 2007. "Infrastructure and regional growth, growth dynamics and policy relevance for India," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 41(3), pages 581-599, September.
    43. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-618, Nov.-Dec..
    44. Henderson, Vernon, 2003. "The Urbanization Process and Economic Growth: The So-What Question," Journal of Economic Growth, Springer, vol. 8(1), pages 47-71, March.
    45. World Bank, 2012. "World Development Indicators 2012," World Bank Publications - Books, The World Bank Group, number 6014.
    46. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    47. Solarin, Sakiru Adebola & Shahbaz, Muhammad, 2013. "Trivariate causality between economic growth, urbanisation and electricity consumption in Angola: Cointegration and causality analysis," Energy Policy, Elsevier, vol. 60(C), pages 876-884.
    48. Masahisa Fujita & Paul Krugman, 2004. "The new economic geography: Past, present and the future," Advances in Spatial Science, in: Raymond J. G. M. Florax & David A. Plane (ed.), Fifty Years of Regional Science, pages 139-164, Springer.
    49. Chengri Ding, 2013. "Transport Development, Regional Concentration and Economic Growth," Urban Studies, Urban Studies Journal Limited, vol. 50(2), pages 312-328, February.
    50. Paul M. Romer, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maparu, Tuhin Subhra & Mazumder, Tarak Nath, 2021. "Investigating causality between transport infrastructure and urbanization: A state-level study of India (1991–2011)," Transport Policy, Elsevier, vol. 113(C), pages 46-55.
    2. Yuee Gao & Xin Zou & Rujia Chen & Yanli Ma & Chengjiang Li & Yaping Zhang, 2020. "Freight Mode Coordination in China: From the Perspective of Regional Differences," Sustainability, MDPI, vol. 12(7), pages 1-24, April.
    3. Shahbaz, Muhammad & Loganathan, Nanthakumar & Sbia, Rashid & Afza, Talat, 2015. "The effect of urbanization, affluence and trade openness on energy consumption: A time series analysis in Malaysia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 47(C), pages 683-693.
    4. Batool, Irem & Goldmann, Kathrin, 2021. "The role of public and private transport infrastructure capital in economic growth. Evidence from Pakistan," Research in Transportation Economics, Elsevier, vol. 88(C).
    5. Arvin, Mak B. & Pradhan, Rudra P. & Norman, Neville R., 2015. "Transportation intensity, urbanization, economic growth, and CO2 emissions in the G-20 countries," Utilities Policy, Elsevier, vol. 35(C), pages 50-66.
    6. Balsalobre-Lorente, Daniel & Bekun, Festus Victor & Etokakpan, Mfonobong Udom & Driha, Oana M., 2019. "A road to enhancements in natural gas use in Iran: A multivariate modelling approach," Resources Policy, Elsevier, vol. 64(C).
    7. Alam, Khalid Mehmood & Li, Xuemei & Baig, Saranjam & Ghanem, Osman & Hanif, Salman, 2021. "Causality between transportation infrastructure and economic development in Pakistan: An ARDL analysis," Research in Transportation Economics, Elsevier, vol. 88(C).
    8. Omoshoro-Jones, Oyeyinka Sunday, 2016. "A Cointegration and Causality Test on Government Expenditure –Economic Growth Nexus: Empirical Evidence from a South African Province," MPRA Paper 102085, University Library of Munich, Germany, revised 17 Oct 2017.
    9. Simón Sosvilla-Rivero & Marta Gómez-Puig, 2016. "“Debt-growth linkages in EMU across countries and time horizons”," IREA Working Papers 201610, University of Barcelona, Research Institute of Applied Economics, revised Apr 2016.
    10. Elena Cigu & Daniela Tatiana Agheorghiesei & Anca Florentina Gavriluță (Vatamanu) & Elena Toader, 2018. "Transport Infrastructure Development, Public Performance and Long-Run Economic Growth: A Case Study for the Eu-28 Countries," Sustainability, MDPI, vol. 11(1), pages 1-22, December.
    11. Mohammad Jaforullah, 2015. "International tourism and economic growth in New Zealand," Working Papers 1502, University of Otago, Department of Economics, revised Apr 2015.
    12. Glass, Anthony, 2009. "Government expenditure on public order and safety, economic growth and private investment: Empirical evidence from the United States," International Review of Law and Economics, Elsevier, vol. 29(1), pages 29-37, March.
    13. Shahbaz, Muhammad & Loganathan, Nanthakumar & Muzaffar, Ahmed Taneem & Ahmed, Khalid & Ali Jabran, Muhammad, 2016. "How urbanization affects CO2 emissions in Malaysia? The application of STIRPAT model," Renewable and Sustainable Energy Reviews, Elsevier, vol. 57(C), pages 83-93.
    14. T. Thanh-Binh Nguyen & Kuan-Min Wang, 2010. "Causality between housing returns, inflation and economic growth with endogenous breaks," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 8(1), pages 95-115.
    15. Dimitrios Koutmos, 2018. "Interdependencies between CDS spreads in the European Union: Is Greece the black sheep or black swan?," Annals of Operations Research, Springer, vol. 266(1), pages 441-498, July.
    16. Ciro Bazán & Víctor Josué Álvarez-Quiroz & Yennyfer Morales Olivares, 2022. "Wagner’s Law vs. Keynesian Hypothesis: Dynamic Impacts," Sustainability, MDPI, vol. 14(16), pages 1-25, August.
    17. Gohar Samvel Sedrakyan & Laura Varela-Candamio, 2017. "The Impact of Public Expenditures on Economic Growth in Two Very Different Countries: A comparative Analysis of Armenia and Spain," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1702, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    18. Toro López Maritza & Van den Broeck Pieter, 2021. "Analysing (In)Justice in the Interplay of Urbanisation and Transport: The Case of Agrarian Extractivism in the Region of Urabá in Colombia," Quaestiones Geographicae, Sciendo, vol. 40(2), pages 35-61, June.
    19. Hussain Ali Bekhet & Raed Walid Al-Smadi, 2016. "The dynamic causality between FDI inflow and its determinants in Jordan," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 11(1), pages 26-47.
    20. Sanwei He & Shan Yu & Lei Wang, 2021. "The nexus of transport infrastructure and economic output in city-level China: a heterogeneous panel causality analysis," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 66(1), pages 113-135, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:100:y:2017:i:c:p:319-336. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.