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Development of Transportation Infrastructure in the Context of Economic Growth

In: Dynamic Systems, Economic Growth, and the Environment

Author

Listed:
  • Manuel Benjamin Ortiz-Moctezuma

    (IIASA)

  • Denis Pivovarchuk

    (IIASA)

  • Jana Szolgayova

    (IIASA)

  • Sabine Fuss

    (IIASA)

Abstract

Developed road infrastructure is one of the main ingredients to economic growth. At the same time, economic growth enables further expansion of infrastructure. The co-evolutionary aspects of the growth of economic output and road infrastructure are thus apparent and represent the main motivation for the study presented in this chapter. We develop a model analyzing the interdependence between a country’s economic growth and the development of transportation infrastructure in this country, explicitly taking into account the mutual influence of the rate of economic growth and the transportation capacity. Formulating an optimal control problem, the optimal investment rate can be determined. This model forms a comprehensive framework for understanding the underlying dynamics and the patterns of economic growth in relation to transport infrastructure. An analytical solution for the infinite horizon problem is derived and the steady state is shown to depend crucially on the rate of physical decay of roads. Testing the model for the data of two countries illustrates the usefulness of such an approach to real world problems and possibly policy recommendations, even though the model would have to be adapted to the specific characteristics of each country or region to make precise statements.

Suggested Citation

  • Manuel Benjamin Ortiz-Moctezuma & Denis Pivovarchuk & Jana Szolgayova & Sabine Fuss, 2010. "Development of Transportation Infrastructure in the Context of Economic Growth," Dynamic Modeling and Econometrics in Economics and Finance, in: Jesús Crespo Cuaresma & Tapio Palokangas & Alexander Tarasyev (ed.), Dynamic Systems, Economic Growth, and the Environment, pages 259-289, Springer.
    • Handle: RePEc:spr:dymchp:978-3-642-02132-9_13
    DOI: 10.1007/978-3-642-02132-9_13
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