UC Davis Institute of Transportation Studies

The purpose of this study is to measure the economic impact of rural road improvement in the early 20th century. Estimates of output elasticity with respect to road input are calculated utilizing a translog production function for 1904-1921. The results suggest that investment in road spending is most effective in regions with a paucity of good roads. By 1920, total expenditures on roads and bridges were on par with total spending on public education. The presence of farmers led to a significant reduction in the amount of local road expenditure and that opposition may explain a significant amount of the observed variation in local road expenditures across counties. For the period 1900-1920, roads had a modest effect on school attendance rates but a significant effect on the average number of days attended per pupil and teacher quality. There was thus a significant social externality associated with investments in road capital in the early U.S. in the form of better educational outcomes. Examining the economic effects of road improvements sheds light on the relationship between infrastructure improvements and economic development which may be applied in developing countries.