584436

research-article2015
EDQXXX10.1177/0891242415584436Economic Development QuarterlyChen and Haynes

Research and Practice

Economic Development Quarterly

Regional Impact of Public Transportation

2015, Vol. 29(3) 275­–291
© The Author(s) 2015
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DOI: 10.1177/0891242415584436

of the U.S. Northeast Megaregion edq.sagepub.com

Zhenhua Chen1 and Kingsley E. Haynes2

Abstract
This research examines the regional impact of public transportation infrastructure in the northeast megaregion of the United
States: public highways, railways, transit, and airports. Infrastructure stock is valued in monetary terms from 1991 to 2009. A
spatial panel approach with fixed effects is adopted to test the hypothesis of spillovers by controlling for spatial dependence.
The result suggests that transportation infrastructure, in general, does have a significant impact on regional economic growth,
most of which is from spillover effects. Highways have an overwhelming influence through local effects and spillover effects.
The impacts from public railways and airports are significant, but transit impacts are insignificant, although a positive spillover
effect is found.

Keywords
regional impact, multimodal transportation, spatial econometrics, northeast megaregion

In recent years, there has been an increasing debate about
how to effectively allocate public funding for U.S. transpor-
tation infrastructure. Some favor a traditional approach that
focuses on continued investment in the primary highway net-
work. Others support an alternative mix mode approach, rep-
resented by high-speed intercity passenger rail but including
expansion of public transit and air transport. This debate is
particularly heated in regions such as the U.S. northeast
megaregion where passenger intercity rail and public transit
is widely utilized. With passage of the Federal Aviation
Administration (FAA) Modernization and Reform Act of
2012 and the Moving Ahead for Progress in the 21st Century
(MAP-21), the U.S. transportation infrastructure received
additional financial resources for coming years. How to allo-
cate these funds or future public funding wisely and effi-
ciently so that a higher level of socioeconomic return can be
achieved is a critical challenge for decision makers. It is criti-
cal to establish an understanding of the regional economic
impacts of the transportation infrastructure system. To
achieve this objective, this study is conducted to add a piece
of new evidence to the literature.
This study follows the goals and questions concerning the
impact of transportation investment in regional output
explored in an earlier article using different methodology
and data sources (Chen & Haynes, 2013). The results are
similar, which gives us some confidence in the robustness of
findings presented here. The study differs from previous
studies in the following respects.
First, the focus of the investigation is on multiple modes
of transportation infrastructure in the northeast megaregion
in the United States, which includes highways, public rail-
ways,1 public transit,2 and public airports.3 This research
design allows us to evaluate the relative importance of differ-
ent transportation modes in terms of output elasticity.
Second, the study considers a mature transportation sys-
tem. A mature transportation system refers to a system that
is mostly completed and is currently at a developed rather
than at a construction stage. At the stage of construction,
economic impacts of transportation infrastructure are not
primarily derived from network effects such as a better con-
nectivity and accessibility. Instead, impacts are mostly
derived from construction-related activities, and job cre-
ation is driven by the demand for raw materials, equipment,
engineering design, and technology installation. At the
developed stage, because transportation networks are com-
pleted, impacts from added transportation infrastructure
can further be achieved through network effects as well as
the effects from maintenance, operation, and continuous
1
University of Southern California, Los Angeles CA, USA
2
George Mason University, Arlington, VA, USA
Corresponding Author:
Zhenhua Chen, Sol Price School of Public Policy, University of Southern
California, 3710 McClintock Avenue RTH322, Los Angeles CA, 90089,
USA.
Email: zhenhuac@price.usc.edu
276 Economic Development Quarterly 29(3)
technology-upgrading activities. Furthermore, user behav-
ior is stabilized in mature systems. Because of these
different effects, the marginal effects of transportation
infrastructure are not constant across stages as the system is
built out.
Recognizing the different stages of transportation infra-
structure development is important, especially when doing
project comparison or modal comparison analysis, as it helps
avoid the mistake of “comparing apples and oranges.”
Meanwhile, such a consideration helps improve the appreci-
ation of the economic impacts of critical infrastructures
under similar conditions.
Third, this study focuses on the northeast megaregion in
the United States, which is also referred to variously as meg-
alopolis (Gottmann, 1961) and BOSWASH (Kahn & Wiener,
1967). This is an important region but lacks sufficient inves-
tigation in terms of economic impact of transportation infra-
structure. The metropolitan statistical area (MSA) is selected
as the scale of this analysis because most economic activities
occur in MSAs. In addition, the northeast corridor primarily
refers to the railway corridor between Boston and Washington,
D.C.4 The rail system is owned by the National Railroad
Passenger Corporation (Amtrak), which is a public transpor-
tation agency that serves between Boston in the north via
New York City and Washington, D.C., in the south.
Conducting the study at the MSA level is useful for capturing
the scale effects of transit and public rail infrastructure on
regional economic performance. A list and a map of all
MSAs are illustrated in Appendices A and B, respectively. In
total, the study covers 30 MSAs and 2 micropolitan statisti-
cal areas (microSAs).
This study addresses the following research questions:
What are the regional impacts of transportation infrastruc-
ture in the northeast megaregion? How do such impacts vary
across public transportation infrastructure modes: highways,
rail, transit, and airports? Are there any spillover effects from
public transportation infrastructure investment? And if yes,
how do these effects vary across transportation modes?
Following the research discussion, the study lays a theo-
retical foundation for the assessment based on literature. Data
and methodology are then introduced, with an interpretation
of the empirical results and a conclusion closing the study.
Literature Review
The regional impact of transportation infrastructure is
reviewed from the perspective of traditional economic the-
ory and the new economic geography. Meanwhile, the need
for a multimodal investigation is also discussed.
Traditional Theory
Given that a series of articles by Aschauer (1989, 1990, 1994)
argued that enhancing public infrastructure expenditures will
help regions to achieve their economic potential, a large num-
ber of studies on public infrastructure were conducted follow-
ing a neoclassical approach using various forms of aggregated
production functions (Bhatta & Drennan, 2003; Boarnet,
1997; Boarnet & Haughwout, 2000; Duffy-Deno & Eberts,
1991; Fernald, 1999; Gramlich, 1994, 2001; Harmatuck,
1996; Mattoon, 2002; Nadiri & Mamuneas, 1996). Given the
nature of different evaluation methods, time periods, mea-
sures of economic outcome, and control variables, findings
are inconsistent. Some argue that transportation infrastruc-
ture, such as the highway system, had a positive and a large
impact on productivity (Fernald, 1999; Harmatuck, 1996;
Keeler & Ying, 2008); others suspect the magnitude of such
an impact (Boarnet, 1997; Button, 1998).
Specifically, Aschauer (1989) and Munnell and Cook
(1990) analyzed the relationship between public capital and
economic performance from 1970 to 1986 at the national and
state levels, respectively. The output elasticity of public capi-
tal stock was found to be 0.38 to 0.56 (Aschauer, 1989) and
0.15 (Munnell & Cook, 1990), respectively, with highways
alone contributing 0.06 (Munnell & Cook, 1990). By focus-
ing on nonmilitary public capital in the period between 1949
and 1985, Harmatuck (1996) found the economic impact
from such investment to be positive and significant. However,
Lau and Sin (1997) found different returns to public capital
of around 0.1, which was much smaller than what Aschauer
and Munnell had found. These earlier studies (Aschauer,
1989; Munnell & Cook, 1990) were determined to suffer
from a series of statistical issues that may have jeopardized
their results (Jorgenson, 1991).
Scholars also argue that the scale of analysis matters in this
kind of research. The rate of return becomes less significant
when investigated at the state level as opposed to the national
level. By using a general equilibrium model as well as state-
level public capital data, Holtz-Eakin and Lovely (1996)
found that public capital did not significantly affect output.
Garcia-Mila, McGuire, and Porter (1996) also found no posi-
tive relationship between public capital and private output.
Those studies using econometric estimation have been
subjected to a variety of criticisms. Gramlich (1994) sum-
marized these problems as follows:
•• Unclear causal relationship between infrastructure
and economic performance
•• Poor use of policy variables that were inconsistent in
terms of level with relevant infrastructure variables
•• Lack of isolation of factors influencing macroeco-
nomic performance: mixing transport with higher
level variables and often leaving out issues in soft
infrastructure including law, education, business ser-
vices, and defense
•• Different methodologies are applied to different types
of data sets, resulting in implications that attribute an
imprecise weight to quantitative estimates
Chen and Haynes 277
Spatial Perspective
Most early studies did not consider spatial interactions
among units across geographic locations. Those studies nor-
mally assumed spatial homogeneity. According to spatial
theory, estimation outcomes may vary significantly if spatial
dependence is not considered in regional analysis (LeSage &
Pace, 2009). Munnell (1992) indicated that the estimated
impact of public capital becomes smaller as the geographic
focus narrows. She suggested this is because of the effects of
leakages from an infrastructure investment could not be cap-
tured at a small geographic level. Although this hypothesis
may not be entirely accurate, as indicated by Boarnet (1998),
it does suggest that the spatial dimension influences estima-
tion and should not be neglected.
LeSage (1999) emphasized that traditional econometrics
has largely ignored the spatial dimension of sample data.
When data contain geographic information, the issue of spa-
tial dependence between observations may violate the
Gauss–Markov theorem. Without considering this spatial
issue, the estimation results may be statistically biased.
Thanks to the development of spatial econometric tech-
niques by Paelinck and Klaassen (1979), Cliff and Ord
(1981), Anselin (1988), LeSage and Pace (2009), Elhorst
(2014), and many others, a number of empirical spatial ana-
lytical methods were developed. One of the dominant func-
tions is to allow for the measurement of spatial spillover
effects. These effects refer to situations in which the input in
one sector or region influences changes in neighboring local
economies through trade linkages and market relationships
(Bo, Florio, & Manzi, 2010). Transportation infrastructure
may have a spillover effect on regional economic growth
because the benefits generated from infrastructure would not
be confined to that specific region (Moreno & López-Bazo,
2007). To test the hypothesis empirically, different types of
spatial models were adopted (Cohen & Morrison Paul, 2003,
2004; Holtz-Eakin & Schwartz, 1995; Kelejian & Robinson,
1997).
Reviews of the existing literature regarding spatial impact
of transportation infrastructure (Boarnet, 1998; Cohen, 2007;
Cohen & Morrison Paul, 2003, 2004; Holtz-Eakin &
Schwartz, 1995; Kelejian & Robinson, 1997; Mohammad,
2009; Moreno & López-Bazo, 2007; Ozbay, Ozmen-Ertekin,
& Berechman, 2007) indicate that conclusions are not con-
sistent given the fact that different data, methods, regions,
and periods were used. Despite the development of spatial
econometric techniques enabling scholars to investigate
spillover effects of infrastructure in a more comprehensive
way, most studies have considered spatial lag dependence or
spatial error dependence alone. In the circumstance when no
solid evidence indicates whether a spatial dependence or a
spatial error model is preferred, LeSage and Pace (2009) rec-
ommend a spatial Durbin model be applied. Without ade-
quate interpretation of the reasons for why a specific spatial
model is used, it is likely that these studies may have estima-
tion bias because of the neglect of a specific spatial issue.
Unimodal Versus Multimodal
Another common feature of infrastructure impact studies is
that many of them investigate transportation from a uni-
modal perspective. Some focus on public capital or transpor-
tation infrastructure in aggregate (Berndt & Hansson, 1992;
Duffy-Deno & Eberts, 1991; Kelejian & Robinson, 1997),
whereas others only focus on a specific mode such as high-
ways or airports (Cohen, 2007; Cohen & Morrison Paul,
2003, 2004; Holtz-Eakin & Schwartz, 1995; Ozbay et al.,
2007). Very few studies investigate the issue from a multi-
modal and comparative perspective (Anderson, Anderstig, &
Harsman, 1990; Blum, 1982; Cantos, Gumbau-Albert, &
Maudos, 2005).
Theoretical Motivation
The theoretical motivation of this study is to follow the path
of the new economic geography to test the spatial effects of
public transportation infrastructure. As one of the world’s
largest agglomerations, the northeast megaregion functions
as one of the primary engines of economic growth and devel-
opment in the world economy. Transportation plays a central
role on regional economic activities, both interregionally and
intraregionally. On one hand, completion of transportation
infrastructure networks among two regions may benefit each
other because of better connectivity and accessibility.
Regional economic growth could be achieved because of the
significant reduction of transportation costs of both goods
delivery and labor mobility (Krugman, 1991). On the other
hand, economic agglomeration may happen because of
declining of spatial and temporal distance. Labor and raw
material may start to flow into one region from other regions
(Fujita, Krugman, & Venables, 1999). Consequently, the
growth of one region may be achieved while leaving other
regions stagnant when assuming the existence of scant
resources in the society.
This unequal regional impact of transportation infrastruc-
ture may also happen because of the competitive nature of
public investment. In other words, positive economic growth
is likely to be achieved when a heavy public investment
occurs in one region relative to other regions. This may
induce a negative impact on regional growth in other regions
because of insufficient public investment. In sum, whether
spillover effects exist among different modes of transporta-
tion deserves a thorough investigation.
As Fingleton and López-Bazo (2006) pointed out, many
regional studies modeled externalities in a somewhat ad hoc
manner that often fails to consider the causes of externalities.
For example in Boarnet’s (1998) path-breaking work, spatial
dependence was only considered for the variable of streets
278 Economic Development Quarterly 29(3)
and highways. The externalities of regional output as well as
labor and private capital were not mentioned. Given the
nature of his modeling structure and his finding of a negative
spillover of public streets and highways, this may be an
issue.
In this study, we test Boarnet’s hypothesis of negative out-
put spillovers from public transportation infrastructure. To
make the analysis consistent with Boarnet’s study, a neoclas-
sical model in the form of a Cobb–Douglas production func-
tion is established. In addition, the study expands Boarnet’s
work in the following ways. First, public infrastructure
includes not only highways and streets but also public rail,
public transit, and airports. This multimodal focus will
enable us to differentiate the relative importance of transpor-
tation infrastructure by mode and their impact on regional
output. Second, a test of endogeneity is conducted to identify
the direction of potential causation between output and capi-
tal input. Third, a systematic spatial modeling selection
approach is introduced to achieve a rigorous estimation.
Data and Methodology
This section outlines the analytical process, which is divided
into five steps: data selection, data refining, spatial model-
ing, preliminary tests, and final analysis.
Data Selection
Variables are selected with consideration to research ques-
tions as well as availability. Because of data limitations, it is
a challenge to find transportation capital stock data measured
in monetary terms. Many studies use approximate variables
as alternatives, such as miles of highways and rail lines,
numbers of air passengers (Anderson et al., 1990;
Jiwattanakulpaisarn, Noland, Graham, & Polak, 2009), or
numbers of freight rail stations (Blum, 1982), to quantify
infrastructure stock. These physical unit substitutes for finan-
cial data, although relevant in engineering terms, are less sat-
isfactory in economic terms.
Whereas most of the economic variables are publicly
available, transportation variables measured in monetary
terms are difficult to find. This is an even greater challenge
for investigation at a disaggregated level both spatially and
by mode. In the United States, most capital stock data are
only available at the aggregated level provided by the U.S.
Bureau of Economic Analysis (BEA). The most relevant
transportation capital stock data by mode can be found in the
Transportation Statistics Annual Reports published by the
U.S. Bureau of Transportation Statistics (BTS).
These data, however, are not adopted in this study because
the data are only available for years 1998 to 2008. Earlier
years of data were not collected. In addition, majority of the
data reflect privately owned capital stock levels. Public capi-
tal stock of rail and transit are unfortunately combined in the
category “other publicly owned transportation.” A further
follow-up with officials in BTS and BEA confirmed the
impossibility of disaggregating these data. Therefore, the
public rail, transit, and airport capital stock in the northeast
megaregion are estimated based on the financial information
gathered from the U.S. Census Bureau and Amtrak.
Data Refining
All variables are converted into per capita measured in 2005
real dollar terms. Variables at a per capita level instead of at
a gross level help to reduce the influence of demographic
variations and the size effect of each MSA. The details of the
data refining process are illustrated in Table 1. The variables
are refined through several steps. The first step is to aggre-
gate or disaggregate the original data to the unified MSA
level based on an apportioning weight. Private fixed asset
was disaggregated from the national level by using industrial
earnings as a weight (the ratio of total industrial earnings of
each MSA divided by the national level industrial earnings).
Data of gross metropolitan product (GMP) per capita
(adjusted to 2005 dollars) and employment are directly
retrieved from the BEA website (www.bea.gov).
Second, the focus of our assessment is on transportation
capital stock. The concept represents stock rather than flow.
Transportation capital stock is adopted as the indicator of
transportation infrastructure inputs. Since no disaggregated
transportation infrastructure stock data are publicly available,
they have to be estimated manually. Before the estimation,
two assumptions were made. First, to simplify the estimation
process, all transportation capital stock are assumed to be
static and nonmovable for the period of assessment; and sec-
ond, all movable transportation stock such as bus and railway
rolling stock, are assumed to be possessed by the geographic
locations where their headquarters are located. The stock of
each mode is calculated through the following function using
the perpetual inventory method (PIM):
TKt = (1 − δ)TKt −1 + TI t ,
where TK and TI indicate transportation capital stock and
transportation capital expenditure, respectively, and δ
denotes the geometric depreciation rate of transportation
stock. The geometric depreciation rate has been regarded as
the appropriate value for infrastructure asset studies and has
been commonly adopted by BEA (Katz & Herman, 1997).
As far as the value of δ is concerned, the rate of 4.1% is
adopted in accordance with other studies (Holtz-Eakin, 1993;
Hulten & Wykoff, 1981; Ozbay et al., 2007). The initial capi-
tal stock levels (TK1990) of each mode are estimated using
PIM based on public capital expenditure from 1970 to 1990.
The trade-off between regional level of analysis and accu-
racy of data is an issue that to which particular attention
Chen and Haynes 279

Table 1.  Data Refining Process.

Original data Sources Initial stock Method

GMP Regional Data, GDP by State BEA — —
Private fixed asset Table 6.1. Current-Cost Net BEA — Following Garofalo and Yamarik
Stock of Private Fixed Assets by (2002), the national capital
Industry Group and Legal Form of stock estimates is apportioned
Organization to each metro area using
Table 6.2. Chain-Type Quantity Indexes annual private industry earning
for Net Stock of Private Fixed Assets as a proxy.
by Industry Group and Legal Form of
Organization
Employment CA04 Total Employment (number of BEA —  
jobs)
Public rail capital Amtrak NEC Infrastructure Amtrak Federal grant to Perpetual inventory method
stock Expenditure NEC project from (PIM), infrastructure
Amtrak Fact Sheets of States VA, DC, Department of 1972 to 1990b expenditure is apportioned by
MD, DE, PA,NJ, NY, CT, RI, MA, NH, Engineering ridership. Capital procurement
and ME Department of is based on geographic
Public Affairsa location.
Highway capital Annual Survey of State and Local U.S. Census PIM estimated based Aggregated from individual
stock Government Finances and Census of Bureau on 1970-1990 government units based on
Governments (1970-2009)c their jurisdictional locations.d
Transit capital Annual Survey of State and Local U.S. Census PIM estimated based Aggregated from individual
stocke Government Finances and Census of Bureau on 1970-1990 government units based on
Governments (1970-2009) their jurisdictional locations.
Airport capital Annual Survey of State and Local U.S. Census PIM estimated based Aggregated from individual
stock Government Finances and Census of Bureau on 1970-1990 government units based on
Governments (1970-2009) their jurisdictional locations.
Population BEA CA1-3 Person Income Summaryf U.S. Census PIM estimated based Aggregated from individual
Bureau on 1970- 1990 government units based on
their jurisdictional locations.

Note. BEA, Bureau of Economic Analysis; GMP, gross metropolitan product; GDP, gross domestic product.
a
Northeast corridor capital infrastructure expenditures include data from 1990 to 2009 for the main line and is obtained from the Department of
Engineering at Amtrak. Data only include capital expenditures on safety and reliability, high-speed rail facilities. Data include federal, state, and local
government expenditures. bThe initial railway infrastructure stock of the northeast corridor contains two parts. The majority of the corridor assets were
purchased from the Consolidated Rail Corporation (Conrail) during 1976-1980 as part of the disposition of the Penn Central Transportation Company’s
assets (U.S. Government Accountability Office, 2004, p. 7). The second part was formed from the Northeast Corridor Improvement Project from 1976
to 1990 (Federal Railroad Administration, 1998). cData include federal, state, and local government expenditures. dDetails of calculation can be provided
on request. eTransit modes include bus, commuter rail, light rail, and personal transit. fU.S. Census Bureau midyear population estimates.

should be paid for the impact assessment of capital stock.
Although the assessment may be easier to implement at the
aggregated level (such as the national level or state level)
given the data availability, the assessment becomes challeng-
ing at the disaggregated level (especially at the MSA or
county level) as data are usually not available and capital
stock has to be estimated. As a result, it should be noted that
as the data being estimated move away from the “ideal,” so
does the level of confidence in the results.5 Hence, it is
important for any user to carefully review and assess such
disaggregation for the level of confidence needed.
Next, all stock per capita is converted to real 2005 dollars
to eliminate the influence of inflation. The World Bank gross
domestic product (GDP) deflator for the United States is
applied to all transportation stock variables. The temporal
distributions of all variable means are illustrated in Figure 1.
After the logarithmic transformation, the means of all vari-
ables are stable between 1991 and 2009, which suggests that
the per capita-based variables are stationary. The descriptive
statistics for the distributions of all variables are described in
Table 2.
The distribution of transportation infrastructure in the
northeast megaregion is uneven in terms of both mode and
geography. Highway has the highest value of average stock
per capita whereas public rail has the lowest. With regard to
geographic comparison, regional differences in stock are
very large. For instance, the highest highway stock per capita
is $2,168, which is for the Ocean City MSA in New Jersey in
2009. The lowest amount is $108, which is in the Boston–
Cambridge–Quincy MSA in 1991. The Trenton–Ewing MSA
280 Economic Development Quarterly 29(3)
14
12
10
8 can be interpreted as elasticity. The disturbance term ui,t is
6
4 ui ,t = µi + νi ,t , (2)
2
lgmppc lpfapc lhwyspc lamspc
0 ltraspc lttspc lemp lairspc
Figure 1.  Temporal variations of the variable means.
Note. Total number of observations = 608. All variables were measured
in level and in logarithmic term. gmppc = GMP per capita, emp =
employment, hwyspc = highway stock per capita, airspc = public airport
stock per capita, amspc = public rail stock per capita (Amtrak Northeast
Corridor), traspc = transit capital stock per capita, ttspc = total
transportation stock per capita (highway + public airport + public rail +
public transit).
in New Jersey has the highest amount of public rail stock per
capita, whereas the amount equals zero in MSAs such as
Willimantic microSA in Connecticut, the Lebanon MSA in
Pennsylvania, and the Lewiston–Auburn MSA in Maine
where there is no public rail service. Transit stock has a simi-
lar distributional pattern. The New York–Northern New
Jersey–Long Island MSA has the highest amount of transit
stock per capita, whereas MSAs such as the Vineland–
Millville–Bridgeton MSA in New Jersey and the Willimantic
microSA in Connecticut have no public transit stock. The
Washington–Arlington–Alexandria MSA has the highest
public airport capital stock per capita, although some regions
have almost no public airport capital stock because of negli-
gible amounts of public airport expenditures. In sum, the dis-
tribution of transportation infrastructure in the northeast
megaregion is quite uneven. Most stocks are clustered in
urbanized and population-dense MSAs along the northeast
corridor, such as Washington D.C., Baltimore, Philadelphia,
New York, and Boston. This may further imply the existence
of a positive spatial autocorrelation.
Spatial Modeling Structure
To test Boarnet’s hypothesis of negative spillover effects of
public infrastructure, the study follows the same neoclassical
model structure in a Cobb–Douglas production function
form. The basic equation is defined as
Yi ,t = f ( Li ,t , K i ,t , Ti ,t ) + ui ,t , (1)
where Y denotes the economic output in region i at period t,
which is measured by GMP per capita, and L and K denote
level of employment and private capital asset per capita,
respectively. T is the key policy variable, which denotes
transportation infrastructure stock per capita, either in total
or by mode. All variables are converted in the logarithmic
term, so the coefficients from the log-linearized estimation
specified as
where µi represents MSA-specific effect assumed to be inde-
pendent and νi,t is a classical random disturbance, which is
assumed iid (0, σν2 ). ui,t can be modeled as either fixed or
random effect. The MSA-specific effect includes regional
specific factors for output such as “endowment of natural
resources, the quality of public infrastructure, physical char-
acteristics of a MSA, the ability to attract and utilize foreign
investment and network effects” (Pinnoi, 1994, p. 130).
Preliminary Tests
In the fourth step, three preliminary tests are implemented so
as to provide supportive information for model selection.
The first is to test whether all the variables are stationary.
This is an important prerequisite of regional impact analysis
as any use of nonstationary data may lead to a spurious esti-
mation. In addition, given the spatial nature of data being
used, a panel unit root test with a consideration of cross-sec-
tional dependence is also needed. The cross-sectional aug-
mented Dickey Fuller (ADF)/covariate-augmented Dickey
Fuller (CADF) statistics method proposed by Pesaran (2007)
is adopted and implemented in STATA using the pescadf
command (Lewandowski, 2007). The results of the standard
panel stationary tests (Levin, Lin, & Chu, 2002), as summa-
rized in Table 3, suggest that all the variables are statistically
significantly stationary. Although variables are generally sig-
nificant at the 10% level in the CADF test, the variable rep-
resenting the total transportation capital per capita is
insignificant even at the 10% level. This is possible because
of the strong spatial dependence of transportation infrastruc-
ture across the northeast megaregion.6
An important issue regarding the regional impact analysis
of transportation infrastructure is the endogeneity between
transportation stock and economic output. On one hand,
transportation investment enhances the connection of the
regional transportation network, which subsequently facili-
tates both freight and passenger movement by reducing the
generalized transportation cost. On the other hand, the
improvement of economic performance may, as a conse-
quence, lead to an increase in demand for both freight and
passenger mobility, which thus requires more investments for
transportation infrastructure improvement. Failure to recog-
nize this endogenous issue may severely jeopardize the out-
come of investigation and may further lead to mistaken policy
Chen and Haynes 281

Table 2.  Descriptive Statistics.

Variables M SD Min Max Unit

GMP per capita (gmppc) 41,387 9,341 26,408 89,688 2005$
Employment (emp) 874,057 1,846,585 41,942 1.10e+07 No. of jobs
Private capital per capita (pfapc) 95,733 23,109 37,527 220,121 2005$
Highway capital per capita (hwyspc) 714 330 108 2,168 2005$
Public rail capital per capita(amspc) 71 103 0 668 2005$
Transit capital per capita (traspc) 281 649 0 3,871 2005$
Airport capital per capita (airspc) 95 148 0 928 2005$
Total transport capital per capita (ttspc) 1,161 896 329 5,935 2005$

Note. Total number of observations: 608. gmppc = GMP per capita, emp = employment, pfapc = private fixed asset per capita, hwyspc = highway capital
stock per capita, amspc = public rail capital stock per capita (Amtrak Northeast Corridor), traspc = transit capital stock per capita, airspc = public
airport capital stock per capita, ttspc = total transportation (highways + public rails + transits + public airports) capital stock per capita. Source. Bureau of
Economic Analysis and U.S. Census Bureau.

Table 3.  Panel Unit Root Test (32 Metropolitan Statistical Areas, 1991-2009).

Levin, Lin, and Chu (2002) Pesaran’s CADF

Variable name Stat. Prob. Obs Stat. Prob. Obs

GMP per capita (lgmppc) −9.279 .000 561 −4.256 .000 544
Employment (lemp) −7.311 .000 533 −1.519 .064 544
Private capital per capita (lpfapc) −5.894 .000 521 −1.574 .058 544
Total transport capital per capita (lttspc) −4.414 .000 570 −1.228 .110 544
Highway capital per capita (lhwyspc) −8.989 .000 564 −1.832 .033 544
Public rail capital per capita (lamspc) −1.944 .026 403 — — 544
Public airport capital per capita (lairspc) −3.203 .000 425 — — 544
Public transit capital per capita (ltraspc) −13.675 .000 425 — — 544

Note. All variables were measured in level and in logarithmic term. Automatic lag length selection based on SIC: 0 to 3. “—” indicates no test result is
generated because of containing zero numbers; CADF = covariate-augmented Dickey Fuller.

implication. Therefore, the issue of endogeneity must be
addressed before any concrete impact analysis is attempted.
In general, the classic Granger causality test (Granger,
1969) can be used to test the temporal directional linkage
between regional output and economic input. Of course
“causality” is a difficult and complex issue but the granger
test establishes the necessary but insufficient condition for
causality (i.e., which comes first in time). This is critical for
identifying and understanding endogeneity, among other
things. As illustrated in Table 3, the stationary test indicates
that all economic output and input variables are stationary,
which implies the data are cointegrated and can be utilized
directly for a Granger test. Using the generalized method of
moments (GMM) estimator by controlling for the influ-
ences of labor and private capital, the results of the Granger
test suggest that endogeneity between transportation inputs
and the regional economic outputs is not a serious issue in
our assessment. Transportation infrastructure is found to
“Granger cause” the GMP per capita, whereas the reversed
effects were not found (Table 4).7
To further confirm the results of the Granger test, the
Hausman test is conducted. The rationale of the Hausman test
is to compare instrumental variable (IV) estimates using the
two-stage GMM estimator to ordinary least squares (OLS)
estimates. If a significant difference were found between the
two estimates, then the test suggests that endogeneity does
exist and the two-stage IV-GMM estimator is preferred.
The results of the Hausman test for endogeniety and the
Hansen J test for overidentifying restrictions are reported in
Table 5. The insignificance of the Hansen J tests suggests that
all instrumental variables are valid. The first total transporta-
tion stock per capita (TTSPC) model tests whether the total
public transportation capital per capita (lttspc) is endogenous
in the model, where GMP per capita is the dependent variable
and labor and private capital per capita are exogenous vari-
ables. The null hypothesis is that lttspc is properly exogenous
in the model. The test statistic has a p value of .177, suggesting
that the test cannot reject the null hypothesis. In other words,
the total public transportation infrastructure input variable is
exogenous in the model. Likewise, in the four modes model,
highway capital per capita (lhwyspc), public airport capital per
capita (lairspc), public rail capital per capita (lamspc), and
public transit capital per capita (ltraspc) are treated as endog-
enous regressors. The Hansen J test shows all instrumental
282 Economic Development Quarterly 29(3)

Table 4.  Panel Granger Causality Tests.

GMPPC-TTSPC GMPPC-HWYSPC GMPPC-AMSPC GMPPC-TRASPC GMPPC-AIRSPC

Dependent Variable gmppc ttspc gmppc hwyspc gmppc amspc gmppc traspc gmppc airspc

Independent Variables
gmppc (-1) 1.094*** 0.003 1.067*** −0.015 1.059*** −0.513* 1.047*** −0.586 1.011*** 0.168
ttspc  
ttspc (-1) −0.02*** 0.992***  
hwyspc −0.013** 0.013 −0.011*** 0.038 −0.007** −0.105**
hwyspc (-1) −0.014** 0.988***  
amspc −0.005** 0.000 −0.005*** 0.002 −0.005** −0.030**
amspc (-1) −0.005*** 0.997***  
traspc −0.001 0.000 −0.002 −0.026* −0.002 −0.017
traspc (-1) −0.002** 0.989***  
airspc −0.003 −0.007** −0.004** 0.011 −0.004*** −0.009  
airspc (-1) −0.006** 0.938***
emp 0.012*** 0.009** 0.014*** −0.006 0.015*** 0.010 0.014** 0.015 0.016*** 0.135***
pfapc −0.086*** −0.032* −0.065** −0.061 −0.030 0.325 −0.048** 0.026 −0.019 −0.212**
Arellano–Bond test for 0.682 0.147 0.074 0.123 0.07 0.366 0.100 0.117 0.101 0.526
AR(2), (p value)
Wald test (H0: lags = 0) 179.85*** 0.01 4.67** 0.24 35.53*** 3.54* 5.57** 0.42 36.22*** 3.48
Number of observations 576 576 306 306 300 300 305 305 306 305

Note. All variables were measured in level and in logarithmic term. All models are estimated using the Arellano and Bond dynamic panel system generalized
method of moments (GMM) estimations. gmppc = GMP per capita, emp = employment, pfapc = private fixed asset per capita, hwyspc = highway capital
stock per capita, amspc = public rail capital stock per capita (Amtrak Northeast Corridor), traspc = transit capital stock per capita, airspc = public airport
capital stock per capita, ttspc = total transportation (highways + public rails + transits + public airports) capital stock per capita.
*Significant at the 10% level. **Significant at the 5% level. ***Significant at the 1% level. All other tests assume asymptotic normality.

variables are valid to estimate coefficients at the 5% level. The
Hausman test suggests that the four transportation variables
are statistically significantly exogenous to the modeling struc-
ture. Based on the results of both the Granger causality test
and the Hausman test, the endogenous issue of transportation
infrastructure is not considered in this assessment.
The third test is to check whether spatial autocorrelation
exists. The spatial autocorrelation, measured by the value of
Moran’s I, is tested for all variables by the software GeoDa.
The universal global Moran’s I is defined as (Cliff & Ord,
1981; Moran, 1950)
∑
n
n wij ( xi − x )( x j − x )
i =1
I= ⋅ , (3)
∑ ∑ ∑ dent and independent variables. Metropolitan statistical areas
n n n
wi j wij ( xi − x ) 2
i =1 j =1 i =1
where n is the number of MSAs, which in our case equals 32,
x and x denote the specific MSA and the mean of x, respec-
tively. wij is the spatial weight matrix, representing the spa-
tial relationships between region i and j. This spatial
relationship in the study is defined as being contiguous to
each other; thus the spatial weight matrix is generated using
the Queen contiguity method.8
The global Moran’s I of all the variables are displayed in
Table 6. Interestingly, except for employment, the Moran’s
I values of a few variables are significant, which indicate
spatial autocorrelations exist across most of the variables.
Negative values of Moran’s I are found for the employment
and transit capital, which indicates a tendency toward dis-
persion. With respect to GMP per capita, private fixed-asset
per capita, total transportation capital, public highway capi-
tal, and rail capital, positive and significant Moran’s I val-
ues are found, indicating a tendency toward clustering. The
existence of spatial dependence among both the dependent
variable and independent variables implies a complicated
spatial issue for this analysis.
Spatial Analysis
From a theoretical perspective, it is reasonable to assume
spatial autocorrelation may possibly exist among both depen-
such as Washington D.C., Baltimore, Philadelphia, New
York, and Boston function as regional growth poles that may
have strong economic relations with their neighboring
MSAs. Thus, a spatial dependence may exist in the regional
output variable. On the other hand, spatial autocorrelation
may also exist among independent variables such as employ-
ment, private capital, and transportation infrastructure across
different MSAs in the northeast region because of the
agglomeration effect and integrated urbanization.
To avoid ad hoc modeling specification and also to ade-
quately accommodate various potential spatial externalities,
a spatial Durbin model (SDM) that includes the spatial lags
of both dependent and independent variables is adopted as
Chen and Haynes 283

Table 5.  Hausman Test for Endogeniety.

TTSPC model Four modes model

  lttspc lhwyspc, lamspc, ltraspc

2
Regressors tested χ p value χ2 p value
Hansen J statistics (overidentification test of all instruments) 0.000 .989 8.518 .074
Endogenous test of endogenous regressors 1.041 .308 4.336 .363

Note. The four transportation infrastructure input variables are tested separately following the per capita–based production function form. Lag variables of
the endogenous regressor are treated as instrumental variables at the first stage. Employment and private fixed-asset per capita are treated as exogenous
control variable in the second stage. Regional output variable (lgmppc) is the dependent variable. The null hypothesis for the Hansen J test is that
instrumental variables are valid. The null hypothesis for endogenous test is that the tested regressor is exogenous. TTSPC = total transportation stock
per capita.

Table 6.  Descriptive Statistics of Spatial Dependence (Global Moran’s I).

gmppc emp pfapc ttspc hwyspc airspc amspc traspc

1991 0.214** −0.073 0.214** 0.249** 0.084 0.070 0.209* −0.003
1992 0.195* −0.074 0.195* 0.233* 0.106 0.100 0.199* −0.006
1993 0.185** −0.075 0.185* 0.221* 0.131 0.099 0.197* −0.011
1994 0.188** −0.075 0.188** 0.205** 0.162 0.099 0.190** −0.020
1995 0.189*** −0.075 0.189* 0.198* 0.200** 0.112 0.187* −0.023
1996 0.182** −0.076 0.182* 0.190** 0.224** 0.101 0.187* −0.033
1997 0.171* −0.076 0.171* 0.187 0.210* 0.135 0.191 −0.043
1998 0.148 −0.076 0.148* 0.197** 0.215** 0.152* 0.192* −0.047
1999 0.154* −0.075 0.154* 0.195** 0.225* 0.126 0.199* −0.050
2000 0.157** −0.075 0.157** 0.189* 0.214** 0.121 0.200** −0.056
2001 0.168 −0.074 0.168* 0.185* 0.216* 0.092 0.199** −0.056
2002 0.160* −0.072 0.160 0.176* 0.219** 0.083 0.200** −0.054
2003 0.151 −0.070 0.151 0.163 0.219** 0.079 0.195** −0.055
2004 0.150* −0.069 0.150** 0.138 0.218** 0.085 0.195** −0.067
2005 0.153 −0.068 0.153* 0.121 0.219* 0.088 0.192** −0.073
2006 0.160* −0.068 0.160* 0.114 0.240** 0.095 0.197* −0.077
2007 0.175* −0.068 0.175* 0.101 0.237*** 0.101 0.192** −0.083
2008 0.182** −0.069 0.182* 0.102 0.252** 0.109 0.185* −0.084
2009 0.170* −0.068 0.170* 0.089 0.257** 0.112 0.185** −0.086

Note. ***, **, and * denote that coefficients are significant at 1%, 5%, and 10% statistical levels, respectively. The spatial weight matrixes are generated
based on Queen contiguity method.

the initial model form. The general form of SDM recom- procedure to test which spatial model is preferred. Table 7 dis-
mended by LeSage and Pace (2009) is denoted as plays the test results of Elhorst’s routine. Although the Lagrange
multiplier (LM) test suggests a spatial lag model is preferred,
n n the general test (with consideration of a likelihood ratio [LR]
Yit = ρ ∑W Y ij jt + X it β + ∑ (W X ij jt )θ + µi + νit , (4) test) recommends that a spatial Durbin model is more efficient.
j =1 j =1 The Hausman test confirms that fixed effect is preferred.
One of the key functions of spatial analysis is to investigate
νi ,t  N (0, σi2,t ), the spatial effects among different MSAs. Because the spatial
information of neighboring regions is added in the form of a
where Y and X denote the dependent and explanatory vari- spatial weight matrix, the SDM is endowed with the capacity
ables, respectively. WY and WX denote the spatial lag terms to separate spatial effects from total effects (LeSage & Pace,
of dependent variable and explanatory variables, respectively. 2009). As a result, three types of impacts can be estimated
ρ, β, and θ denote coefficients that would be estimated. through the spatial model: average direct impact, average indi-
To help identify the appropriate spatial panel model in a sys- rect impact, and average total impact (LeSage & Pace, 2009).
tematic way, we follow the Elhorst (2014) spatial model testing The first impact measures the influences of the explanatory
284 Economic Development Quarterly 29(3)
Table 7.  Lagrange Multiplier (LM) Test and Likelihood Ratio (LR) Test.
TTSPC model
  Test statistic (p value)
LM lag 94.753 (.000)
LM error 27.861 (.000)
LM lag robust 71.251 (.000)
LM error robust 4.358 (.037)
H0: θ = 0
LR value 130.092 (.000)
H0: θ + ρβ = 0
LR value 217.746 (.000)
variables that come from the same geographic unit as the
dependent variable. The second impact measures influences of
explanatory variables that come from different geographic
units. The third impact consists of both the direct impacts and
indirect impacts. Although some studies (for instance,
Mohammad, 2009) give these impacts different names, such
as long-term local effect, long-term neighbor effect, and long-
term total effect, respectively, they represent the same classi-
fied effects as specified here.
To make the analysis consistent with Boarnet’s study, this
study focuses on mature transportation infrastructure only,
thus a constant regional impact of transportation infrastruc-
ture is considered in this investigation. In addition, only spa-
tial fixed effect is considered in our investigation. This makes
the results comparable to previous studies. Given the fact
that the panel unit root test confirms that public transporta-
tion infrastructure and the economic variables are stationary
during the research period, the inclusion of potential time
fixed effect may add influences that may contaminate the
model estimation and purpose.
Empirical Results
Some studies, for example, Cohen and Morrison Paul (2007),
suggest that higher order spatial weight matrix are important as
transportation infrastructure may have spillover effects not only
on its adjacent neighbors, but that its impact may spill over fur-
ther to higher order neighbors.9 To demonstrate the robustness
of our analysis, different spatial weight specifications including
inverse distance and various k nearest neighbors are adopted.
Table 8 displays estimation results of the regional impacts of the
aggregated transportation infrastructure capital stocks of four
modes using different spatial weight specifications. The spatial
lags of both dependent and independent variables are highly sta-
tistically significant in the SDM, which indicates that both spa-
tial dependence and spatial autocorrelation are captured. After
controlling for spatial autocorrelation, employment is found to
be the most important factor for regional output. The output
elasticity of public transportation infrastructure capital stock
ranges between 0.11% and 0.22%.
In the four modes model, the total transportation variable is
constituted as highways, public rail, transit, and airport
Four modes model
Test statistic (p value)
118.959 (.000)
49.379 (.000)
70.866 (.000)
1.306 (.253)
 
138.604 (.000)
 
233.772 (.000)
variables. The estimation results are displayed in Table 9. Most
of the spatial components are statistically significant. After
controlling for the effects of employment and private capital,
highway infrastructure has a positive effect on the regional eco-
nomic output. The elasticity ranges between 0.05 and 0.1,
which can be interpreted as a 1% increase in highway infra-
structure per capita is associated with a 0.05% to 0.1% increase
in GMP per capita, ceteris paribus. Public rail is also signifi-
cant, although with much smaller impacts than highways.
In the SDM with spatial fixed effect, transit and airport capi-
tal stock per capita are found insignificant when an inverse dis-
tance and 5 nearest neighbors spatial weights are adopted.
Airport capital is significant when 1 nearest neighbor is intro-
duced and transit capital is significant when 3 nearest neighbors
spatial weight is adopted. A possible explanation for such differ-
ences may be because of the different levels of spatial autocor-
relation being captured in each specification. Spatial dependence
of each transportation mode varies substantially because of their
different service area and network characteristics. This sensitiv-
ity issue that is found in our study further confirms the finding
of Kelejian and Robinson (1997), who point out that the estima-
tion of regional infrastructure productivity involving spatial
spillover is very sensitive to model specifications.
Spillover effects of transportation infrastructure were esti-
mated using various spatial weight specifications. Both a gen-
eral form and a modal comparative form are estimated,
respectively. Table 8 illustrates different regional effects of the
general transportation infrastructure. The result suggests that
its direct, indirect, and total effects are all significant. In terms
of the magnitude, the direct effects range between 0.031 and
0.066, whereas the indirect effects range between 0.057 and
0.157 depending on the specification of spatial weights. The
results indicate that public transportation infrastructure in the
northeast megaregion, in general, has both a positive local
effect and a positive spillover effect. Most of these effects are
achieved through spillover effects on neighboring economies.
The results suggest spillover effects of employment and
private capital stock also exist. The total elasticity effects of
labor range between 0.912 and 1.234, indicating labor plays
a pivotal role in stimulating regional economic growth in the
northeast region. On the other hand, private capital was
Chen and Haynes 285

Table 8.  Estimation Results From Spatial Fixed Panel Models (TTSPC Model).

Model 1 Model 2 Model 3 Model 4

Spatial weight Inverse distance 1-nearest neighbor 3-nearest neighbors 5-nearest neighbors
Direct effect
 emp 0.437*** (15.754) 0.486*** (14.375) 0.398*** (11.592) 0.339*** (9.453)
 pfapc 0.268*** (4.194) 0.268*** (13.454) 0.354*** (18.816) 0.343*** (18.093)
 ttspc 0.052*** (4.168) 0.066*** (6.190) 0.059*** (5.583) 0.031*** (2.984)
Indirect effect
 emp 0.570*** (15.754) 0.422*** (10.636) 0.705*** (11.809) 0.893*** (11.494)
 pfapc −0.140*** (4.194) −0.127*** (−5.812) −0.407*** (−11.468) −0.375*** (−9.641)
 ttspc 0.057*** (4.168) 0.083*** (6.469) 0.157*** (7.502) 0.098*** (3.362)
Total effect
 emp 1.007*** (15.754) 0.912*** (17.715) 1.102*** (16.546) 1.234*** (14.676)
 pfapc 0.128*** (4.194) 0.140*** (4.957) −0.053 (−1.387) −0.033 (−0.793)
 ttspc 0.109*** (4.168) 0.149*** (7.578) 0.216*** (8.138) 0.129*** (3.844)
Spatial variables
 W*dep.var. 0.325*** (8.573) 0.251*** (8.223) 0.358*** (8.965) 0.389*** (8.126)
 W*emp 0.299*** (6.055) 0.235*** (6.070) 0.358*** (6.430) 0.458*** (6.286)
 W*pfapc −0.195*** (−8.890) −0.174*** (−8.453) −0.417*** (−15.231) −0.381*** (13.725)
 W*ttspc 0.027* (1.872) 0.053*** (4.728) 0.090*** (6.161) 0.053*** (2.833)
 ML 1367.884 1352.509 1404.307 1403.687
 Sigma2 0.0007 0.0007 0.0006 0.0006
  R2 0.985 0.985 0.987 0.987
 Corr2 0.937 0.932 0.948 0.948

Note. Numbers in parentheses are t-statistics. *, **, and *** denote significant level at 10%, 5%, and 1%, respectively. All variables were transformed into
logarithmic terms. TTSPC = total transportation stock per capita.

found to have a positive and significant contribution to out-
put. The direct elasticity effect is around 0.27 to 0.35, mean-
ing that a 1% increase of private capital stock per capita is
associated with a 0.27% to 0.35% increase in regional out-
put. On the contrary, the indirect effect of private capital is
−0.127 to −0.407, meaning a 1% increase of private capital
stock per capita in a metropolitan area is associated with a
0.127% to 0.407% decrease of regional output in its neigh-
boring metro areas. This suggests the competitive nature of
private capital investment in this regional economy.
Table 9 also displays the spillover effects of transporta-
tion infrastructure by mode. In terms of a modal spillover
effect comparison, the highway variable has both positive
direct and indirect effects. This implies after controlling for
labor, private capital, and public capital of rail, transit, and
airport, highway infrastructure has a positive impact to both
the local economy and its neighboring economies.
A positive effect of public rail capital stock is found to
exist in both the local effect and the spillover effect. A higher
magnitude of the spillover effect indicates that intercity pas-
senger rail plays a role in facilitating interregional passenger
flow, which may possibly result in regional economic growth
through labor mobility and knowledge spillover.
Public transit has a relatively small effect on regional out-
put compared to highway and public rail. Although significant
direct effects are found across estimations using various
spatial weights, significant indirect effects are found when
lower order of spatial weights (smaller than 5) are used. The
spillover effects range between 0.01 and 0.055, which can be
interpreted as a 1% change in transit stock per capita is associ-
ated with a 0.01% to 0.055% change in its neighboring
economy.
Public airport capital stock also has different influences
on regional output through both direct and indirect effects.
Generally, the local effect of public airport capital ranges
between 0.005 and 0.007, suggesting that a 1% increase in
public airport capital stock per capita is associated with a
0.005% to 0.007% increase of output in the local economy.
The spillover effect of airport declines when higher order
spatial weights are adopted.
Conclusion
This study improves the understanding of the linkages
between regional output and transportation infrastructure
within the context of the U.S. northeast megaregion. Unlike
traditional studies, estimations are improved mainly through
two considerations: (a) adopting financial data measured in
monetary terms with a focus on the period between 1991 and
2009 and (b) introducing spatial analysis with a cautious
approach to model specification. The regional impact of dif-
ferent transportation modes can be summarized in Figure 2.
286 Economic Development Quarterly 29(3)

Table 9.  Estimation Results From Fixed Panel Model and Spatial Fixed Panel Models (Four Modes Model).

Model 1 Model 2 Model 3 Model 4

Spatial weight Inverse distance 1-nearest neighbor 3-nearest neighbors 5-nearest neighbors
Direct effect
 emp 0.410*** (15.754) 0.461*** (17.234) 0.377*** (12.454) 0.340*** (9.944)
 pfapc 0.273*** (4.194) 0.266*** (13.755) 0.322*** (18.079) 0.341*** (18.424)
 hwyspc 0.036*** (4.168) 0.053*** (5.207) 0.025** (2.240) 0.025* (1.926)
 amspc 0.004* (1.865) 0.006*** (2.482) 0.003 (1.326) 0.001 (0.264)
 traspc 0.002 (−0.542) −0.001 (−0.254) 0.005 (1.232) 0.001 (−0.276)
 airspc 0.006*** (3.816) 0.007*** (4.378) 0.005*** (3.090) 0.005*** (3.355)
Indirect effect
 emp 0.546*** (9.961) 0.429*** (10.911) 0.708*** (12.246) 0.778*** (9.932)
 pfapc −0.126*** (−5.096) −0.100*** (−4.581) −0.374*** (−10.401) −0.338*** (−8.605)
 hwyspc 0.016*** (0.688) 0.047*** (3.345) 0.044 (1.550) 0.068 (1.274)
 amspc 0.018*** (3.503) 0.013*** (4.300) 0.030*** (4.940) 0.026*** (2.958)
 traspc 0.013* (1.694) 0.010*** (2.060) 0.055*** (5.737) 0.012 (0.832)
 airspc 0.001 (0.165) 0.007** (2.720) −0.017** (−2.609) −0.010 (−1.391)
Total effect
 emp 0.955*** (14.361) 0.891*** (17.234) 1.086*** (16.763) 1.118*** (13.695)
 pfapc 0.147*** (4.194) 0.166*** (6.070) −0.052 (−1.392) 0.003 (0.080)
 hwyspc 0.052*** (4.168) 0.100*** (5.014) 0.069* (1.890) 0.094 (1.469)
 amspc 0.023*** (3.370) 0.019*** (4.160) 0.033*** (4.443) 0.027*** (2.582)
 traspc 0.011 (1.059) 0.009 (1.200) 0.060*** (5.129) 0.011 (0.630)
 airspc 0.007 (1.441) 0.015*** (4.041) −0.012 (−1.621) 0.004 (−0.541)
Spatial variables
 W*dep.var. 0.328*** (8.707) 0.246*** (8.045) 0.357*** (9.362) 0.395*** (8.342)
 W*emp 0.291*** (6.039) 0.253*** (6.757) 0.372*** (6.884) 0.379*** (5.274)
 W*pfapc −0.186*** (−8.399) −0.150*** (−7.213) −0.383*** (−14.244) −0.357*** (−12.528)
 W*hwyspc −0.001 (−0.026) 0.027** (2.331) 0.023 (1.310) 0.034 (1.04)
 W*amspc 0.012*** (3.428) 0.010*** (3.891) 0.020*** (4.981) 0.018*** (3.140)
 W*traspc 0.011** (1.973) 0.009** (2.215) 0.038*** (5.959) 0.008 (0.909)
 W*airspc −0.002 (0.565) 0.005** (2.028) −0.014*** (9.362) −0.008** (−2.001)
 ML 1388.719 1376.741 1454.386 1424.986
 Sigma2 0.0006 0.0006 0.0005 0.0005
  R2 0.986 0.986 0.989 0.987
 Corr2 0.942 0.938 0.954 0.951

Note. Numbers in parentheses are t-statistics. *, **, and *** denote significant level at 10%, 5%, and 1%, respectively. All variables were transformed into
logarithmic terms.

The result confirms that transportation infrastructure in
the northeast megaregion during this period has a positive
impact on regional economic output, most of which is
achieved through regional spillover effects. In terms of
modal comparison, highway infrastructure dominates with
a larger impact than other transportation modes. Public rail-
way infrastructure has the second largest impact, whereas
public airport and transit impacts rank third and fourth.
Our findings reject Boarnet’s hypothesis that public capital
has a negative spillover effect on regional growth. Instead, posi-
tive spillover effects are observed both for total transportation
capital stock and for highway capital in particular after control-
ling for the spillover effects of labor and private capital. The
finding is robust across different weight specifications. In addi-
tion, positive spillover effects are found to exist in other
transportation infrastructure modes including public rail and
transit. The spillover effects of public airport vary when differ-
ent spatial weights are specified. The findings also differ from
Holtz-Eakin and Schwartz (1995), who found no evidence of
positive output spillover across states for the case of highway
capital. The results confirm that transportation infrastructure has
both positive local effects and positive output spillovers.
The research findings provide two implications. First,
transportation infrastructure in the northeast megaregion has
a significant impact on regional economic growth, at least in
the period between 1991 and 2009. Because of the nature and
maturity of the transportation systems, the major benefits are
likely achieved through the network effects of transportation
systems, which often stimulate regional growth through
spillovers instead of local effects.
Chen and Haynes 287

Transportation
(0.142)

Highway Public Rail Public Transit Public Airport

(0.100) 70% (0.019) 13% (0.009) 7% (0.014) 10%

Direct Indirect Direct Indirect Direct Indirect Direct Indirect

(0.053) (0.047) (0.006) (0.013) (-0.001) (0.010) (0.007) (0.007)

Figure 2.  Regional impact of transportation infrastructure.

Note. Dashed line indicates an insignificant estimation; output elasticity is included in parentheses. Results are based on the 1-nearest neighbor
specification models. Source. Authors’ calculations.

Second, our multimodal investigation reveals that the
total effect of each transportation infrastructure investment
varies substantially given the differences of capital stock per
capita by mode. It is clear that in the northeast megaregion,
highways have the most dominant impact. Passenger rail and
airports function as complements to other modes and also
have significant impacts to regional output. Although transit
receives a comparatively high level of public investment, it
has a relativly small influence on regional output.
It should be noted that the findings in the studies are sub-
ject to the specific data and methodology being used. Thus,
the conclusion and implication should not be generalized and
may vary if any specification is altered. It should also be
noted that the assessment results of the public transportation
infrastructure may vary given the existence of the potential
data issue, specific panel effect being considered, and the
characteristics of spatial econometrics. These issues,
although important caveats of the study, should be addressed
in future research.
Another future research direction is to develop a better
approach to evaluate the impact of railway systems. Given
the nature of mixed infrastructure usages for both intercity
rail and commuter rail services in the northeast megaregion,
one possible direction is to measure the effects of the pas-
senger rail infrastructure as a whole. Another approach to
evaluate the impact of public railway infrastructure is to
develop an analytic framework under general equilibrium. In
that case, the micro impact of transportation infrastructure on
the change of social welfare can be assessed. A strategy for
doing this is presented in Chen and Haynes (2014).

Appendix A
Regions in the Analysis.

CBSA Name Type ID

10900 Allentown–Bethlehem–Easton, PA–NJ MSA 17
12100 Atlantic City, NJ MSA 26
12580 Baltimore–Towson, MD MSA 31
12700 Barnstable Town, MA MSA 9
14460 Boston–Cambridge–Quincy, MA-NH MSA 5
14860 Bridgeport–Stamford–Norwalk, CT MSA 14
18180 Concord, NH MicroSA 2
20100 Dover, DE MSA 28
25420 Harrisburg–Carlisle, PA MSA 20
25540 Hartford–West Hartford–East Hartford, CT MSA 10
28740 Kingston, NY MSA 7
29540 Lancaster, PA MSA 24
30140 Lebanon, PA MSA 21
30340 Lewiston–Auburn, ME MSA 0
31700 Manchester–Nashua, NH MSA 3
35300 New Heaven–Milford, CT MSA 15
(continued)
288 Economic Development Quarterly 29(3)

Appendix A  (continued)
CBSA Name Type ID
35620 New York–Northern New Jersey–Long Island, NY–NJ–PA MSA 18
35980 Norwich–New London, CT MSA 13
36140 Ocean City, NJ MSA 29
37980 Philadelphia–Camden–Wilmington, PA–NJ–DE–MD MSA 22
38860 Portland–South Portland–Biddeford, ME MSA 1
39100 Poughkeepsie–Newburgh–Middletown, NY MSA 8
39300 Providence–New Bedford–Fall River, RI-MA MSA 16
39740 Reading, PA MSA 19
42540 Scranton–Wikes–Barre, PA MSA 12
44140 Springfield, MA MSA 4
45940 Trenton–Ewing, NJ MSA 23
47220 Vineland–Millville–Bridgeton, NJ MSA 27
47900 Washington–Arlington–Alexandria, DC–VA–MD–WV MSA 30
48740 Willimantic, CT MicroSA 11
49340 Worcester, MA MSA 6
49620 York-Hanover, PA MSA 25

Note. CBSA = core-based statistical area; MSA = metropolitan statistical area; MicroSA = micropoltian statistical area.
Source: Bureau of Economic Analysis.

Appendix B
Geographic boundaries of the U.S. northeast megaregion.
Chen and Haynes 289
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect
to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research,
authorship, and/or publication of this article.
Notes
1. Public rail in this study is defined as railway infrastructure
that is constructed, maintained, and operated using public
money. Specifically, it refers to the National Passenger Rail
Corporation (Amtrak), which provides intercity passenger
rail services along this corridor and owns most of the infra-
structure. Commuter rail is also run on some shared facilities,
but are counted as public transit in accordance with the clas-
sification of the U.S. Federal Transit Administration. Private
railroad companies such as CSX, Norfolk Southern, and Pan
Am Lines also invested in other railway infrastructure in this
corridor; however, they are excluded in our investigation given
the focus on “public” infrastructure.
2. In total, the study covers 162 transit agencies including buses,
metro rails, commuter rails, and light rails. A list of all transit
agencies can be provided on request.
3. Sixty-five general aviation airports are included in the assess-
ment. A list of all airports can be provided on request.
4. This corridor is also characterized by part of Highway I-95.
5. We appreciate for the comments from the associate editor and
the reviewers.
6. Pesaran’s CADF test does not generate any results for public
rail stock per capita (lamspc), public airport stock per capita
(lairspc), and transit stock per capita (lttspc). This is caused by
the unbalanced panel with missing values in some panel units
as not all MSAs have public rail or airport or transit infrastruc-
ture during the 20-year period.
7. The authors do not think this is likely a generalizable finding
for transportation infrastructure and regional output relation-
ships; it is likely the result of the maturity of these relation-
ships for this region at this period in time. However, given that
consideration, the test results are clear.
8. We appreciate the reviewer’s comment. Alternative weight
specifications including inverse distance, k nearest neighbors
are also tested, which do not show significant differences in
terms of significance.
9. We appreciate the reviewer’s comment.
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Author Biographies
Zhenhua Chen is a postdoctoral research associate in the Price
School of Public Policy at the University of Southern California.
His research interests include economic geography, regional sci-
ence, transportation planning and policy, and public finance.
Kingsley E. Haynes is a professor in the School of Policy,
Government, and International Affairs at George Mason University.
He is a national scholar in regional economic development and
infrastructure.