Effectiveness of Highway Expenditure and Highway Needs: Some New Evidence

Shortfalls in highway revenues have forced highway agencies to develop innovative strategies to finance and manage highway-related assets. These strategies consist of two components – revenue generation and improvements in the efficiency and effectiveness of expenditures. This paper provides some statistical evidence relating to the effectiveness of expenditures. Using ten years of U.S. highway-expenditure data (by program, state, and highway functional class) and performance data (pavement quality index), econometric models are estimated in an attempt to better understand the relationships between highway expenditures and highway performance. Model estimation results provide some new insights into the degree to which alternate expenditure strategies can affect highway system performance. Based on the statistical evidence, a framework to assess highway needs, which is complementary to the prevailing methodologies, is suggested. The suggested framework estimates the required highway investments needs in order to meet the target level of highway performance.