Estimating the Impact of Highways on Economic Activity: Evidence from Appalachian Development Corridor G

This paper analyzes the economic impact of an Appalachian Development Highway (Corridor G) on small business activity using two modeling approaches. The first model eval-uates aggregate economic growth along Corridor G and in the surrounding counties. This es-timate provides no evidence of increased economic activity in adjacent counties due to com-pletion of Corridor G. In order to account for the imprecision of an aggregate estimate, a sec-ond study of over 7,000 firms in the region was performed. This firm-level analysis indicates that proximity to the roadway improves productivity by roughly 1 percent per mile, but only in rural areas. This result suggests that a discrete public infrastructure investment may im-prove productivity in rural firms.