Highways have significant impacts on local economic growth and development, as well as associated population growth. The effects have been studied in several fields, ranging from planning to economics to geography to sociology. Regional economic theories are especially strong in explaining the effects of infrastructure investment on economic growth and development. Neoclassical growth theory, growth pole theory, and location theories are the principal regional economic theories that relate highway investment to economic growth and development and, consequently, to population growth.
Neoclassical growth theory
According to neoclassical growth theory, land, capital, and labor are the three basic inputs that produce outputs. As one type of public capital, highways play three roles in affecting economic and population growth (Table 1). First, highway infrastructure can be considered as an input into the production process via a production function. Many recent literature use the production function to examine the linkage between public capital and economic productivity. As the level of highway infrastructure increases, outputs also increase. However, we should be cautious in making this argument because traffic efficiency is at least as important as the highway capital stocks in promoting productivities. Traffic congestion caused by inefficient highway planning can decrease productivities dramatically. Second, highway and other public infrastructure can influence regional growth by improving the productivity of other inputs, such as labor. Third, public infrastructure can be understood as a household amenity factor to attract workers. In all three cases, the existence of highway and other public infrastructure promotes population growth by attracting firm owners and labor migrants.
Growth pole theory
Growth pole theory employs the concepts of spread versus backwash to explain the mutual geographic dependence of economic growth and development between metropolitan areas and their surrounding rural areas (“hinterland”), which in turn causes population change. Highway effects on population change are supported by empirical examinations of growth pole theory. As a catalyst of change, an improved highway is neither a necessary nor sufficient influence for increased population growth in its surrounding areas. Population decline can also be an outcome. First, a new or better highway can increase rural population by augmenting the “spread” effects of added employment opportunities in or near the surrounding rural areas. Second, better highways allow urban families to move to rural areas. This trend is often driven by the reality of lower real estate costs and the perception of a higher quality of life. Some studies build on, and corroborate, these “spread” effects. Third, a convenient highway will entice rural people to travel to the urban areas for employment opportunities and urban amenities – a “backwash” or negative spillover effect.
It is unclear what the growth pole theory argues about net population change at this point. One solution is to look at different stages of spread versus backwash. Initially when a growth pole begins to form, there should be a period of backwash when the hinterlands decline and the center grows. Later when the spread occurs, the growth spills out into the hinterland, and highways leading to and from growth poles become development axes. This cycle generally occurs over long periods (25 years or more).
Location theory argues that firm location decisions are determined by anticipated revenue, input costs and transportation costs. In order to achieve profit maximization, the firm will choose its location for cost minimization and/or demand maximization. Using location theories (including firm location theory, firm migration theory, and central place theory), scholars interpret the role of highways in a number of ways (Table 1).
To begin, transportation infrastructure facilitates the flows of raw materials, capital, finished goods, consumers, and ideas among central places and their neighborhoods. On the other hand, transportation infrastructure also imposes limits on these flows because it takes time and money to transport. Within this context, Thompson and Bawden have suggested four theoretical tendencies guide empirical examination of highway impacts on economic development and population change. One, transportation improvements increase commutable distance, therefore transforming a dispersed pattern of small central places to fewer large central places with more concentrated productions and services. Next, because highway improvement generally occurs along existing heavily traveled routes and along the routes linking cities, at first it tends to enhance the gap in access between cities and peripheral areas. Third, when highway improvement brings the peripheral areas closer to the center of activities, it will benefit the peripheral areas more than the central cities which have their market areas enlarged. Fourth, previously isolated places can develop specialized production rather than produce all goods required by its population at the commutable distance.
Furthermore, transport can be understood both as a means of importing inputs into and exporting outputs out of a location. As such, highway infrastructure is seen as a factor of production itself. According to this view, highway infrastructure is an important factor in determining locations of firms. Firm location theory helps explain manufacturing location where profit maximization is sought by minimizing the transportation cost for raw materials. It also can explain the location of market-based industries, such as retail services, where the profit maximization is achieved by maximizing demand for its products (i.e., minimizing the transportation cost for consumers to buy).
Moreover, highway infrastructure tends to be necessary but not sufficient for local economic growth and development. Other factors such as a quality labor pool are equally important. Location theory argues that industry seeks locational advantages created by highway improvement. The improvement of transportation by itself, however, cannot create a comparative advantage where none exists.
Although scholars define the role of highway infrastructure differently on the basis of these theories (Table 1), all recognize that highways play an important role in regional economic growth and development. Each interpretation of the role of highway infrastructure has merits: the neoclassical growth theory is strong in explaining metropolitan development after the highway network is built; the growth pole theory is useful for forecasting population change from the standpoint of decision makers, because it specifically studies how resources should be invested in a region given limited resources to invest in economic growth and development; and location theory is strong in interpreting geographic distributions of human settlements. A holistic view is that highway infrastructure is necessary but not sufficient to economic growth and development as well as associated population growth. This view can explain and is supported by the findings of most existing studies. It also matches demographers’ view that highway infrastructure is one of many factors affecting population change.
- Boarnet, M. G. 1997a. "Highways and Economic Productivity: Interpreting Recent Evidence." Journal of Planning Literature 11(4):476-486.
- Boarnet, M. G. 1997b. "Infrastructure Services and the Productivity of Public Capital: The Case of Streets and Highways." National Tax Journal 50(1):39-57.
- Boarnet, M. G. and A. F. Haughwout. 2000. "Do Highways Matter? Evidence and Policy Implications of Highways' Influence on Metropolitan Development." Washington, DC: Brookings Institution Center on Urban and Metropolitan Policy.
- Briggs, R. 1981. "The Interstate Highway System and Development in Nonmetropolitan Areas." Transportation Research Record 812:9-12.
- Chi, G., P. R. Voss, and S. C. Deller. 2006. "Rethinking Highway Effects on Population Change." Public Works Management and Policy 11(1):18-32.
- Dalenberg, D. R. and M. D. Partridge. 1997. "Public Infrastructure and Wages: Public Capital's Role as a Productive Input and Household Amenity." Land Economics 73(2):268-284.
- Eberts, R. W. 1990. "Public Infrastructure and Regional Economic Development." Economic Review 26:15-27.
- Eberts, R. W. 1994. "Some Empirical Evidence on the Linkage between Public Infrastructure and Local Economic Development." Pp. 83-96 in Industry Location and Public Policy, edited by H. W. Herzog and A. M. Schlottmann. Knoxville: University of Tennessee Press.
- Halstead, J. M. and S. C. Deller. 1997. "Public Infrastructure in Economic Development and Growth: Evidence from Rural Manufacturers." Journal of Community Development Society 28(2):149-169.
- Hartshorn, T. A. and S. M. Walcott. 2000. "The Three Georgias: Emerging Realignments at the Dawn of the New Millennium." Southeastern Geographer 41(2):127-150.
- Henry, M. S., D. L. Barkley, and S. Bao. 1997. "The Hinterland's Stake in Metropolitan Growth: Evidence from Selected Southern Regions." Journal of Regional Science 37(3):479-501.
- Hobbs, D. J. and R. R. Campbell. 1967. "Traffic Flow and Population Change." Business and Government Review 8(3):5-11.
- Lichter, D. T. and G. V. Fuguitt. 1980. "Demographic Response to Transportation Innovation: The Case of the Interstate Highway." Social Forces 59(2):492-512.
- Losch, A. 1938. "The Nature of Economic Regions." Southern Economic Journal 5(1):71-78.
- Richardson, H. 1976. "Growth Pole Spillovers: The Dynamics of Backwash and Spread." Regional Studies 10:1-9.
- Thiel, F. I. 1962. "Social Effects of Modern Highway Transportation." Highway Research Board Bulletin 327:1-20.
- Thompson, C. and T. Bawden. 1992. "What are the Potential Economic Development Impacts of High-Speed Rail?" Economic Development Quarterly 6(3):297-319.
- Vickerman, R. W. 1991. "Transport Infrastructure in the European Community: New Developments, Regional Implications and Evaluation." Pp. 36-50 in Infrastructure and Regional Development, edited by R. W. Vickerman. London: Pion Limited.
- Weber, A. 1929. Alfred Weber's Theory of Location of Industries. Chicago, IL: University of Chicago Press.