A cross-region analysis of the output elasticity of transport investment in China

Abstract

This paper aims to investigate the linkage between transport investment and economic development. To achieve it, the contribution of transport investment stock to economic growth was measured using provincial panel data from 1990 to 2010 in China. Empirical result showed the contribution was indeed various across regions. The greatest contribution was found in the central region, followed by the western region and then the eastern region. The cross-region comparison indicated economic returns of extra transport investment were generally positive but their degrees were quite different in different development stages. More specifically, a large contribution was found in pre-policy and deepening stages for the eastern and western regions while it was found in pre-policy and primary stages for the central region. A moderate contribution was seen in deepening stage for the central region while it was seen in primary and expansion stages for the western region. Accordingly, China needs to allocate more transport investments in the central region due to its higher economic returns and important connection position. Additionally, as an extension, the positive impact of transport investment on regional economic growth in China can be taken as an experiment to be replicated by other developing or less-developed nations.

Keywords:

• transport investment
• economic growth
• Cobb–Douglas production function
• output elasticity

Acknowledgments

This article is a revised and expanded version of a paper entitled “A cross-region analysis of the output elasticity of transport investment in China”, presented at the International Association of Maritime Economists (IAME) Conference, Norfolk Beach, Virginia, 15–18 July 2014.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. The definition of Chinese three macro-regions is as follows: Eastern region includes Beijing, Tianjin, Liaoning, Hebei, Shandong, Jiangsu, Shanghai, Zhejiang, Fujian, Guangdong, Guangxi, Hainan. Central region includes Heilongjiang, Jilin, Shanxi, Henan, Anhui, Jiangxi, Hubei, Hunan, and Inner Mongolia. Western region includes Ningxia, Gansu, Qinghai, Sichuan, Yunnan, Guizhou, Chongqing, Shaanxi, Xinjiang, and Tibet (Yu et al. 2012; Zhang 2007; Liu 2010).

2. The data of railway density and highway density are from China Statistical Yearbook.

3. As a policy strategy, fiscal decentralization which began in 1994 has been a fundamental aspect of China’s transition to a market economy. With the development of this policy, local governments have gradually obtained more opportunities to implement large transport projects. For instance, the eastern region has experienced a tremendous increase in the mid-1990s and seen a sharp rise after 2002 (Shen, Jin, and Zou 2012; Yu et al. 2012). Based on this, we generally divide the whole sample into four stages: pre-policy stage (1990–1995), primary stage (1996–2000), expansion stage (2001–2005), and deepening stage (2006–2010).

Additional information

Funding

This work was supported by the National Research Foundation of Korea Grant funded by the Korean Government [grant number NRF-2014S1A2A2027957], and Chung-Ang University.