The impact of transportation infrastructure on regional employment can be reflected through changes in the accessibility of the region affected. A certain region may benefit from the positive externalities associated with a public works project even though the facilities are located in another region. The extent of these spillovers can be determined by using a measure of proximity to highway infrastructure in a model of employment. The first essay in this dissertation examines the distance decay in employment growth and the spatial spillovers of highway investment in the 411-county Appalachian region. Although distance decay in employment is not evident after applying the appropriate spatial model, I do find evidence of substantial spatial spillovers of employment across the region's counties.
In my second essay, I estimate the spatial spillovers of public capital investment in highways on regional output within a production function framework. This essay presents an elaboration of the spatial model selection and estimation methods. The last section of the paper examines the direction of causality between output and highway capital stock using spatial autoregressive models and finds evidence of causation from highway capital stock to output but not vice versa.
Given the wide economic gaps characterizing Appalachian counties, it is also important to examine whether disparate areas respond differently to the same policy interventions and development stimulus. In my third essay I address this question. The Appalachian Regional Commission divides the 411 regional counties into four major categories: 'distressed', 'transitional', 'competitive', and 'attainment'. This essay applies spatial models that account for spatial interdependence to evaluate the impact of Appalachian highways on economically disparate counties. Using a spatial autoregressive model in a production function framework, I find that distressed counties gain from highways whereas competitive counties actually suffer from a backwash effect that tends to draw productive activity away from these counties into neighboring counties.