Impact of Highway Investment on the Economy and Employment across U.S. Industrial Sectors

This study investigated the impact of highway investment on employment in the U.S. industrial sector. A separate simultaneous equations model was developed for each of the 23 industrial sectors covering the entire spectrum of economic activities to address the widely discussed issue of bidirectional causality between highway investment and economic growth. To consider the mechanism by which highway investment actually influenced economic performance, the authors modeled travel demand and highway supply jointly to reflect the level of transportation services. Travel demand plays an important role in the delivery of the effect of highway investment to economic output and employment; in the long run, this demand also affects decision making on highway investment. The models were estimated with a comprehensive panel of data collected over 29 years from 351 metropolitan statistical areas in the United States. The elasticity results suggest that highway investment stimulates economic growth and job creation. For instance, a 10% increase in total highway capacity would yield an annual $326 billion increase in the U.S. gross domestic product. In addition, this 10% increase in capacity is estimated to create approximately 1.5 million new jobs for the whole economy in the long run. However, the economic and employment effects vary across industrial sectors. The findings suggest that although the overall effect on jobs is positive, highway investment leads to employment growth in only 12 of the 23 industrial sectors. In particular, the retail trade, construction, manufacturing, and accommodation service sectors would benefit the most from highway investment.