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Discussion Paper Details

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Title: Roads and Innovation

Author(s): Ajay Agrawal, Alberto Galasso and Alexander Oettl

Publication Date: August 2014

Keyword(s): highways, innovation, regional growth and transportation

Programme Area(s): Industrial Organization

Abstract: We study the interplay between transportation infrastructure, knowledge flows, and innovation. Exploiting historical data on planned portions of the interstate highway system, railroads, and exploration routes as sources of exogenous variation, we estimate the effect of U.S. interstate highways on regional innovation. We find that a 10% increase in a region's stock of highways causes a 1.7% increase in regional patenting over a five-year period. We show that roads facilitate the flow of local knowledge and allow innovators to access more distant knowledge inputs. This finding suggests that transportation infrastructure may spur regional growth above and beyond the more commonly discussed agglomeration economies that are predicated on an inflow of new workers.

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Bibliographic Reference

Agrawal, A, Galasso, A and Oettl, A. 2014. 'Roads and Innovation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10113