Does Transport Infrastructure Benefit Gdp Growth?

Bai, Yuting and Wang, Shuo and Zhang, Hongxu (2023) Does Transport Infrastructure Benefit Gdp Growth? Working Paper. Lancaster University, Department of Economics, Lancaster.

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Abstract

This paper examines how transport infrastructure affects GDP growth by reducing trade costs. Our empirical analysis confirms that improving transport infrastructure quality lowers trade costs, and we estimate the elasticity of trade costs relative to transport infrastructure quality. Specifically, a 1% improvement in average transport infrastructure quality between an emerging and a developed economy can reduce bilateral trade costs by up to 0.71%. To estimate the net effect of changes in infrastructure on GDP growth via trade cost, we used the Computational General Equilibrium framework. Our results demonstrate significant potential for improving GDP growth in different groups of countries based on economic development (i.e., developing countries, emerging countries, and developed countries). We identify and examine the broader implications of transport infrastructure development for the global economy.