Transport-infrastructure investments and regional economic growth
March 19, 2025This paper studies transport-infrastructure investments and regional economic growth, assessing the effects of the substantial expansion of Portuguese motorway and expressway networks between 1991 and 2016. The paper explores this question by considering the evolution of market potential – how easily can firms reach nearby markets and customers. Rather than simply looking at physical distance, market potential reflects the size of local markets and the time required to access them via the road network.
The analysis shows that improved road accessibility strongly encourages new firms to enter, with particularly pronounced effects outside the metropolitan areas of Lisbon and Porto. For example, a 10% increase in market potential leads to a 16% to 19% increase in new businesses within one year and around a 12% increase over a five-year period. We also find that the service sector responds most strongly to improvements in road accessibility.
In conclusion, these findings highlight that investing in better road infrastructure can effectively attract new businesses, at least when road accessibility is more limited. An interesting avenue for future research is to explore relocation dynamics to assess whether new firm establishments reflect genuine business creation or shifts in economic activity across regions. A deeper understanding of these patterns can further inform transport policies aimed at fostering long-term regional economic growth.