Highways and Economic Productivity: Interpreting Recent Evidence

This paper reviews the recent literature on public infrastructure and economic productivity, with special attention to the particular case of highway infrastructure. Recent evidence suggests that, at the margin, highway infrastructure contributes little to state or national productivity. This is consistent with studies that show relatively small land use impacts from modern highways. Yet the idea that highways enhance economic health is common in the policy and planning communities. Two explanations can help reconcile this divergence between academic research and popular perception. First, some of the economic development observed near highways might not actually be caused by the highway. Second, some of the economic development near highways might be a shift of economic activity away from other areas. Either explanation suggests the need for reforms in highway project analysis and funding. Appropriate policy reforms and directions for future research are suggested.