The Temporal and Spatial Effect of Highways on China's Economic Growth

Infrastructure investment is currently enjoying great popularity among governments as a strategy to handle the recent worldwide economic recession. However, the relevant literatures have yet to come to a consistent agreement on how infrastructure, especially transportation, impact economic growth. This paper investigates the effects of highway infrastructure on economic growth using spatial regression models estimated from county data of the Guangxi Zhuang Autonomous Region (GXZAR) in China from 1996-2007. The results indicate that relationships between initial highway infrastructure and economic growth can be positive, negative, or negligible. The spatial effects are also inconsistent. Impacts are stronger in the short-term but diminish over times. We conclude that the highways are a necessary, but not sufficient condition for economic growth. The highway impact depends on other factors as well. Improving infrastructure alone is not likely to cause a continued economic growth