Measuring the Social Return to Infrastructure Investments Using Interregional Price Gaps

Download or read book Measuring the Social Return to Infrastructure Investments Using Interregional Price Gaps written by Zhigang Li and published by . This book was released on 2005 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this study is to provide microeconometric evidence on the welfare gain of transport infrastructure investments. Specifically, I consider an investment in China that doubles the tracks of a one-thousand-mile-long railroad in 1994. This provides a quasi-experimental setting: the expansion in rail capacity only affects the trade of goods in one direction. I first estimate the impact of this investment on interregional price differences, finding that they are reduced by about thirty percent following the investment. I then derive a (partial equilibrium) measure transforming the estimated shrinkage of price gaps into welfare estimates. I find that the internal rate of (social) return of the investment may significantly exceed the costs of capital in China.