Productivity and Quality-of-Life Benefits to Rural Infrastructure

With Albouy D. and Kim H.

The benefits of infrastructure can take on many forms. Most analyses emphasize the effect of infrastructure on measures of output, or income, such as the

dollar value of goods sold. These market-oriented impacts are associated with the “economy” by the public and are labeled by economists as productivity effects. However, infrastructure may also have important quality-of-life benefits involving no market transactions. If a new school saves a family 20 minutes a day in travel time, that may simply increase leisure time. Similarly, beautiful artwork may make locals happier, without boosting their income.

This study estimates the productivity and quality-of-life benefits of public infrastructure investments to rural counties using data back from 1970. To build these estimates, we first consider the impact that public infrastructure has on various local outcomes, including income, employment, housing prices, and agricultural land values. Our economic framework allows us to consider three kinds of productivity—those in agriculture, other outputs tradable across counties, and non-tradable output.

Geographically, we consider whether the benefits of infrastructure spending are different in counties with greater natural amenities. These counties already have desirable natural geographic and climatic features, such as access to water, mild climates and attractive topography. These counties have experienced greater population growth than lower amenity counties.