Will Road Infrastructure Become the New Engine of Urban Growth? A Consideration of the Economic Externalities

Cheng Xue, Yiying Chao, Shangwei Xie and Kebiao Yuan ()
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Cheng Xue: Ocean College, Zhejiang University, Zhoushan 316021, China
Yiying Chao: Ocean College, Zhejiang University, Zhoushan 316021, China
Shangwei Xie: Nanji Islands National Marine Nature Reserve Administration, Wenzhou 325000, China
Kebiao Yuan: School of Economics and Management, Ningbo University of Technology, Ningbo 315000, China

Sustainability, 2025, vol. 17, issue 15, 1-17

Abstract: Highway accessibility plays a vital role in supporting local economic development, particularly in regions lacking access to sea or river ports. Recognizing the functional transformation of road infrastructure, the Chinese government has made substantial investments in its expansion. Nevertheless, a theoretical gap remains in justifying whether such investments yield significant economic returns. Drawing on the theory of economic externalities, this study investigates the causal relationship between highway development and regional economic growth, and assesses whether highway construction leads to an acceleration in growth rates. Utilizing panel data from 14 Chinese cities spanning 2000 to 2014, the synthetic control method (SCM) is employed to evaluate the economic externalities of highway investment. The results indicate a positive impact on surrounding industries. Furthermore, a growth rate forecasting analysis based on Back-Propagation Neural Networks (BPNNs) is conducted using industrial enterprise data from 2005 to 2014. The growth rate in the treated city is 1.144%, which is close to the real number 1.117%, higher than the number for the weighted control group, which is 1.000%. The findings suggest that the growth rate of total industrial output improved significantly, confirming the existence of positive spillover effects. This not only enriches the empirical literature on transport infrastructure but also provides targeted enlightenment for the sustainable development of urban economy in terms of policy guidance.

Keywords: road infrastructure; economic externalities; urban growth; synthetic control method (SCM); Back-Propagation Neural Networks (BPNN) (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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