The author argues that highway and other public infrastructure investments have little impact on the economy. Since the U.S. highway network is already built, most economic benefits from highway projects are localized. Thus, policymakers should be cautious in accepting studies showing significant economic benefits from highway construction since they may just shift economic activity within an area. The author concludes that highway projects should be funded locally so that funding corresponds to the geographic impact of highway project benefits.
Lower prices reflect a transfer of cost savings from firms to consumers.
Production function studies look at the overall relationship between highway capital and economic performance. These approaches can capture spillover effects since they measure impacts beyond a specific project. The first national studies using the production function approach attempted to determine whether falling infrastructure spending accounted for declining productivity growth in the 1970s. These early studies found statistically significant positive relationships between public infrastructure spending and private capital productivity, although the effects were small. These studies, however, were flawed.