There are many unresolved questions over how investment in improved infrastructure to connect people and places improves the economy and productivity in local areas and regions.
This econometrics research provides indicators vital for government and researchers into how funding spend on infrastructure such as broadband, and road and rail links, helps to generate increased productivity, and to speed up economic growth in local areas, wider regions and nationally.
The UK government has identified investment in infrastructure as core to driving forwards its industrial strategy and emphasised the importance of adopting a place-based approach to infrastructure investment.
Bringing places closer together, through improving underlying infrastructure, to widen and deepen markets and lower input costs is widely recognised as an important supply-side driver of economic growth. But how much does connectivity matter in driving growth?
This research helps to quantify hoped-for enhancements to productivity at local area and nationally and takes into account more data variables, dimensions at more local scale than previously, to allow for more detailed and accurate analysis.
One strand of the research assesses the effect of improvements in the quality of broadband provision on the growth of local business establishments in England over the period 2011 to 2015, using high-resolution geographical panel data.
Another strand investigates the relationship between improved connectivity infrastructure on the growth of local economic output and productivity in Great Britain using both a production function and Total Factor Productivity (TFP) approach. To do this, ITRC researchers created an extensive local area database that includes enhanced indicators of infrastructure and economic factors (including previously unavailable estimates of the local capital stock).
Local Authority District
The research resulted in rich and varied analysis and assesses the impact of enhanced connectivity at Local Authority District level for the UK over 2000-2016, a relatively long timespan for comparable research.
Sophisticated panel econometric techniques were used to overcome statistical issues that have hampered earlier studies such as the problem of reverse causality (endogeneity) running from infrastructure to economic performance, and potential spatial dependency.
Researchers used connectivity in three dimensions (rather than standard measures such as road lengths) developing research methods to analyse transport connectivity, digital connectivity, and connectivity to economic mass.
Extensive dataset use
The dataset used was also more extensive than standard, using not only recent economic and infrastructure data but also variables such as human capital and industrial sector compositions.
Connectivity matters. Bringing places closer together, through improving underlying infrastructure, to widen and deepen markets and lower input costs is widely recognised as an important supply-side driver of economic growth. But how much does connectivity matter in driving growth? To answer this question robustly it has been necessary to develop better measures of the quality of local infrastructure that can be used in the economic modelling of local growth and productivity. This has enabled modelling of the relationship between infrastructure quality and local economic growth in the United Kingdom over the period 2000-2016, particularly as it relates to enhanced connectivity and to do this at LAD, urban and possibly other spatial levels (LEP (England)) where this is possible. From this, the findings from the research can be assimilated into improved methodology for appraisal of infrastructure investments.
Identifying the effects of infrastructure on regional/national growth
Understanding the factors that modulate these effects
Understanding how infrastructure planning decisions can take better account of the economic roles of infrastructure.
Basic broadband connectivity is regarded as generally having a positive macroeconomic effect. However, over the past decade there has been an emerging school of thought suggesting the impacts of ... read more