Spatial effects of transport infrastructure on regional growth: the case of Turkey

Abstract

The provision of infrastructure is an important policy tool for promoting regional growth and reducing regional disparities. The main reason underlying this approach is the view that transportation promotes mobility, mobility promotes trade, and trade promotes economic growth. Based on this view, Turkey has invested in transportation infrastructure to reduce the regional economic inequalities since the 1960s. Between 2004 and 2014, governments have expended approximately 65 billion dollars for road infrastructure only. We believe that investigating the recent improvements in road infrastructure with a spatial perspective in an emerging economy as Turkey is necessary to generate more effective and practical regional policies. This study attempts to measure the latest developments of transportation infrastructure by analyzing the spatial effects of road transport infrastructure on regional economy in Turkish NUTS 2 regions between 2004 and 2014. We employ an augmented Cobb-Douglas production function model and use spatial Durbin model to estimate spatial effects. Apart from previous studies that employ spatial econometric models, we create a different spatial weight matrix for each year based on inverse distance to capture the change between the years 2004 and 2014. The results reveal that road infrastructure investment has significant and positive spatial spillover effects on regional growth. Any improvement in road transport infrastructure in a region causes a GDP increase in neighboring regions. Essentially the findings expose the importance of indirect effects of road transport infrastructure and contradict with previous non-spatial and overestimated effect results in the literature.