Working Paper: NBER ID: w27938
Authors: Taylor Jaworski; Carl Kitchens; Sergey Nigai
Abstract: This paper quantifies the value of US highways. We develop a multisector general equilibrium model with many locations in the United States (i.e., counties) and many countries. In the model, producers choose shipping routes subject to domestic and international trade costs, endogenous congestion, and port efficiency at international transshipment points. Applying the model, we find that removing the Interstate Highway System reduces real GDP by $421-$578 billion. The results highlight the gains from intersectoral and international trade as well as the role of domestic transportation infrastructure in shaping regional comparative advantage.
Keywords: Highways; Globalization; Transportation Infrastructure; Trade Costs
JEL Codes: F11; F14; H54; R13; R42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| removal of the interstate highway system (IHS) (R42) | significant decrease in real GDP (E20) |
| removal of the interstate highway system (IHS) (R42) | alteration of the sectoral composition of output across U.S. states (N12) |
| removal of the interstate highway system (IHS) (R42) | reduction in trade costs (F12) |
| removal of the interstate highway system (IHS) (R42) | shift towards more localized consumption of production (F61) |
| removal of ten major interstates (R42) | aggregate losses (E10) |
| contribution of highways to international trade costs (R42) | total effect (C20) |
| removal of the interstate highway system (IHS) (R42) | exploitation of comparative advantages by remote regions (F12) |