Funding System and Road Transport; International Comparative Analysis

Tension between necessity for infrastructure investment and scarcity of public capital is inevitable in modern motorized nations. When fiscal policy needs to be tightened public investment may face deceleration. On the other hand lax funding scheme may give way to over-investment. After an overview of recent trend in funding system of road investment this paper highlights institutional differences in five major nations, USA, UK, France, Germany and Japan, and examines how actual investment is affected. Between 1990 and 2004, we find that in nations such as USA and Japan, where road fund is established, the level of hypothecated fuel tax revenue affects road investment while in other three nations such a relationship is not observed. In USA, Germany and Japan general fiscal condition of the government, indexed by primary balance, has significant effect on road investment with time lags ranging from 1.5 to 4.6 years. In UK and France there is no evidence of such an effect. Given the funding system, we then assess efficiency of road transport in these five nations during the same period from two perspectives; efficiency in terms of 1) how road network has impacted macro-economic MFP growth and 2) how the road transport system as a whole is performing. For the former, this paper reveals that impact of road capital improvement on macro-economic MFP growth is positive only to the extent that physical network had expanded. In Japan and USA and more recently in Germany disproportionate growth in nominal value of road capital has negatively affected MFP growth. For the latter, road transport system composed of road network, automobiles and fuel consumption has been improving with the exception of Japan. Redundancy of transport networks and sparse land-use are major sources of inefficiency.