The Impact of Road Infrastructure on Productivity and Growth: Some Preliminary Results for the German Manufacturing Sector

The Impact of Road Infrastructure on Productivity and Growth: Some Preliminary Results for the German Manufacturing Sector by Andreas Stephan Using time-series cross-section data from the manufacturing sector of the 11 Bundesländer from 1970 to 1993, we examine the impact of road infrastructure on private production applying three different approaches; i.e., a Cobb-Douglas production function, a translog production function and a growth accounting approach. Our econometric analysis explicitly takes into account four of the most frequent problems in the context of time-series cross-section analysis: serial correlation, groupwise heteroscedasticity, cross-sectional correlation and nonstationarity of data. For all approaches and tested specifications, we find that road infrastructure is significant for production in the manufacturing sector. Moreover, we find that variations between the Bundesländer are more important for explaining infrastructure's contribution to production than variations across years. * I would like to thank Christine Zulehner as well as the participants of the 3 Spring Meeting of Young Economists for their helpful comments and suggestions. Furthermore, I would like to thank Christopher Xitco for his excellent secretarial assistance. All errors remain the authors responsibility. Finally, I would like to gratefully acknowledge the Deutsche Forschungsgemeinschaft (DFG) for their financial support of this project.