Transportation Investment and Job Creation in Minnesota Counties

Abstract

Numerous studies have been conducted about the impact of transportation investment on economic development. These studies typically use a conventional production function model of economic development augmented by a public capital input, such as highways, rail, or other transportation investments.The findings, in general, confirm a positive elasticity between transportation investment and economic development, but the range of the effects varies widely among studies. In a recent research project, Zhao (2015) quantifies long-term transportation capital stocks in Minnesota counties and finds that these stocks have positive returns on property values. This study extends Zhao(2015)’s methodology to study the link between transportation investment and job creation. We find that long-term transportation investments contribute significantly to employment in Minnesota counties. The results have several policy implications. First, investments on local roads within a county can increase the employment rate in the county. Second, investments on trunk highway surrounding a county can increase the employment rate in the county. Lastly, in the context of Minnesota, it could be more effective to invest in rural areas compared to urban areas, as far as employment growth in concerned.