HIGHWAY AND RAILWAY INFRASTRUCTURE, REAL INCOME AND STRUCTURAL BREAKS

Abstract

Infrastructure systems affect economic development directly or indirectly depending on their structure, type, quality and quantity. Transportation infrastructure is one of the most important types of infrastructure systems since the improvements in transportation infrastructure has tangible and intangible benefits to economy such as reducing costs, increasing productivity and outputs. Therefore, investment in transportation infrastructure is important, while this contributes to economic development directly by lowering transportation costs and facilitating trade. All sectors include services provided by transport infrastructures are fundamental to economic activities due to enhanced mobility of goods and services. This reflects that the whole economy is related to transportation and the relationship between transportation infrastructure and economic growth has been analyzed in many studies by using different methodological approaches. The aim of this paper is to analyze the relationship between the transportation infrastructure and economic growth in Turkey for the period 1970-2006. Empirical analysis from cointegration tests with and without structural break show that the long run affects of real income, highway length, railway length and labor force on real income vary within tests with respect to sign and significance. However, the relationship between share of transportation in fixed capital investments and real income is positive and significant for all tests including dynamic OLS. This shows that private and public policies toward transportation infrastructure should target investments and improvements in the quality of transportation, not quantity.

Keywords

• highway infrastructure, railway infrastructure, cobb-douglas production function, co-integration tests, structural breaks, transportation investments