Transport Infrastructure Investment, Commuting, and Wages

04/05/2008 |  Frish Roni, Tsur Shay
All Press Releases In Subject:
Monetary Policy and Inflation
Frish roni and Tsur shay
Abstract
Transport infrastructures enhance product by improving firms' access to potential workers, customers, and suppliers. This study estimated the contribution of road and rail investments to the enhancement of firms' access to workers, allowing existing human capital to be used more efficiently and making it possible to narrow wage disparities between periphery and center. Notably, most of the harm caused by inadequate infrastructure relates to workers' access to firms, whereas firms can redirect their activity vis-?-vis customers and suppliers to off-peak times of day.
The study, examined the effect of road and rail investment on the change in commuting between origin regions and destination regions in fifty regions in Israel. We found Several factors caused commuting to expand beyond the increase derived from population growth: an increase in road investment in the origin region and an increase in road investment in destination regions that are metropolitan, that are connected to the national railroad system, and that are traversed by the Cross-Israel Highway. The cumulative investment in transport infrastructure between 1993 and 2003 explains about two-thirds of the total increase in commuting, which added up to 240,000 persons. Examining the effect of countrywide road investment on men's wages, we found that the total road investment in 1992-2004 increased men's average wages by 10 percent.
The full article (Hebrew) in PDF file
To the Discussion Paper Series - Research Department page