The macroeconomic effects of transport infrastructure on economic growth: the case of Central and Eastern E.U. member states

Abstract

This paper empirically investigates the effects of transport infrastructure on economic growth in Central and Eastern European Member States (C.E.M.S.) in the period 1995–2016. During the transition period in C.E.M.S., most investments were focused on the roads, while railways have been lagging for decades. The aim of this paper is to estimate the effects of transport infrastructure (road and rail) on economic growth while controlling with other variables such as population growth, gross fixed capital formation and trade openness. We use panel data analysis with three standard estimators: pooled ordinary least squares, fixed effects and random effects. The results show positive effects in case of all estimated variables, except the railway infrastructure where the effects seem to be negative. The results illustrate the long-standing problem of inefficient and outdated railway infrastructure. These results should be seen in a broader context, especially in the light of the ongoing desire to reduce CO2 emissions that are to a large extent produced by road transport, while railway transport is more environmentally friendly. This paper supports the European Union’s guidelines for the need to invest in railway infrastructure to ensure effective transport in the long term, create competitive advantages, reduce greenhouse gas emissions and thus simulate sustainable economic growth in C.E.M.S