Interstate highway and industrial clustering

Interstate Highway and Industrial Clustering Investment in highway construction is usually justified by the belief that it will contribute to economic growth via a variety of mechanisms: market expansion, regional specialization, acceleration of industrial clusters (agglomeration) and innovation. This paper tries to examine one of those effects, industrial agglomeration – a source of increasing returns and external economies, which can lead to endogenous growth. This study, which focuses on I-85 highway corridor and the furniture industry (NAICS code 337), attempts to clarify two points: whether industrial agglomeration occurred in South Atlantic area and if so, whether the highway corridor is related. Three employment-based concentration indices are calculated for the furniture industry, two of which support the hypothesis of geographical concentration. A localized index of spatial association (LISA) measure is also used. It reveals a hot spot that covers the northern part of I-85 corridor and neighboring counties. A regression analysis with highway dummies indicates that the degree of clustering is higher in counties in the highway corridor itself and in neighboring counties. While the results provide evidence of a spatial relationship between the I-85 highway and agglomeration in the furniture industry, further analysis will be needed to establish a causal relationship.