Estimating the social return to transport infrastructure: A price-difference approach applied to a quasi-experiment

Zhigang Li () and Yu Chen

Journal of Comparative Economics, 2013, vol. 41, issue 3, 669-683

Abstract: Using the price differences between two markets, this study proposes a method for inferring the social return to transport infrastructure (in the vein of Fogel (1964)). We apply this approach to an investment that increased the shipping capacity of a thousand-mile-long railroad in western China. The event was quasi-experimental: before the expansion, the railroad was congested in one direction, but not the other. We find that, after the investment, (1) the between-destination price differences of goods shipped in the congestion direction dropped by about 30% and (2) shipping volume increased by around 40%. In contrast, those of goods in the other direction were not affected. These estimates imply a sizable social return to this particular investment: 10% per year in the most conservative case considered.

Keywords: Infrastructure investment; Inter-regional trade; China (search for similar items in EconPapers)
JEL-codes: H54 O18 R41 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:41:y:2013:i:3:p:669-683

DOI: 10.1016/j.jce.2012.09.004

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