Public Infrastructure and Regional growth: Evidence from Turkey

The aim of this study is to examine the effects of public transportation infrastructure investments on regional economic growth in Turkish NUTS 2 regions between 2004 and 2011. To offer an advanced statistical analysis, we employ an augmented production function model for measuring the effects of different types of transportation infrastructure on regional output. We use specifically ordinary least squares (OLS), fixed effects, two-stage least squares (2SLS) and Hausman-Taylor IV estimation methods with both cross-section and panel data. Our results show that road and motorway infrastructure have strongly significant positive effects on regional output in all our estimations. Land infrastructure is found to play a very important role in regional economic performance in Turkey, while, somewhat surprisingly, air infrastructure has no significant impact on regional GVA, which clearly suggests the existence of different types of transportation infrastructure in the Turkish regions. Also, the high growth elasticity of land infrastructure in the Turkish regions indicates that Turkey is currently still suffering from an inadequate transport infrastructure.