Network infrastructure spillover in private productive sectors: evidence from Spanish high capacity roads

Interest in public infrastructure research has been a subject of increasing concern to economists and policy-makers. This article aims at analysing the locational impact of the high capacity roads (HCR) on the Spanish private economic activity from 1970 through 1998, given that this is one of main infrastructure-based development strategy undertaken in Spain in this period. In a stochastic frontier production-function framework, we allow for modelling of provincial heterogeneity through the existence of different efficiency levels in the territorial units. Results show HCR spillovers between geographically close provinces and between provinces displaying similar socio-demographic characteristics and government size. To the extent that the magnitude and sign of these impacts differ across sectors a reasonable explanation of the limited impact of HCR on aggregate private production could be made. The presence of a negative spillover effect in the industrial and business service sector suggests that Spanish provinces may have used HCR capital as a competitive tool for attracting factors of production leading to a rearrangement in these economic activities.