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Road to Ruin? A Spatial Analysis of State Highway Spending
Author(s) -
BRUCE DONALD,
CARROLL DEBORAH A.,
DESKINS JOHN A.,
RORK JONATHAN C.
Publication year - 2007
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/j.1540-5850.2007.00888.x
Subject(s) - competition (biology) , investment (military) , economics , state (computer science) , econometric model , personal income , public economics , macroeconomics , econometrics , ecology , algorithm , politics , political science , computer science , law , biology
Do states engage in infrastructure expenditure competition to attract new economic activity? Economic theory is inconclusive on the matter. States might respond to increased infrastructure spending in competitor states by increasing their own infrastructure spending. Conversely, states may decrease spending in the presence of positive spillovers from competitor states' infrastructure investment. Using spatial econometric techniques and focusing specifically on highway spending, we demonstrate that states expend less on highways when spending in neighboring states increases. We explore this possibility further by modeling state personal income growth as a function of own‐state and neighbor‐state highway spending. Our findings suggest positive spillovers influence interstate relationships for highway spending rather than race‐to‐the‐top competition for economic activity.