Three Essays on Transportation Investment, Regional Development Economics, and Industrial Location

Abstract

Economic efficiency and equity are two major issues in transportation investment and regional development. Economic growth and regional economic disparity are expected outcomes of transportation investment. While the economic efficiency and equity are often traded-off, the increase in factor mobility could positively affect in regional economies in terms of both the efficiency and equity. Hence, focusing on economic growth, regional economic disparity, and reallocation of factor inputs in relation with transportation invest, this paper attempts to make answers to the following research questions in three composing essays. First, how do we increase the marginal economic benefit of the investments in road and railroad networks? Second, what are the spatial economic impacts of HSR investment in terms of economic efficiency and equity? Third, what are the determinants of firm relocation, and which factors attract relocating firms into the region? The first essay analyzes the spatial economic impacts of road and railway accessibility levels on manufacturing outputs, with a focus on substitution and complementarity of the intra- and the inter-modal relationship. In a Translog production function framework, ceteris paribus, railroad accessibility has positive effects on the marginal value added of local manufacturing industries with respect to both of road and railroad variables, enjoying increasing returns to scale. However, road accessibility could positively influence only on the marginal value added with respect to the railroad variables, holding decreasing returns to scale. This implies that there is not a competing but a complementary relationship between the two transportation modes in terms of increasing manufacturing production. The second essay is to develop a framework for economic analysis of high-speed railroad of Korea (KTX) and estimate the dynamic economic effects of transportation project on the economic growth and the regional disparity in Korea. The framework is composed of a Spatial Computable General Equilibrium (SCGE) model and a micro-simulation module or transportation model of highway and railroad networks. The latter module measures a change in interregional accessibility by highway and railroad line, while the SCGE model estimates the spatial economic effects of the transportation projects on the GDP and the regional distribution of wages. The results indicate that while the development of Honam KTX increase national economic output, regional disparity in terms of GRDP increases, and economic growth effect concentrate to Seoul Metropolitan Area (SMA). However, the increase in factor mobility by time reduces the regional disparity and alleviates the divergence of regional economies as well as enhances economic output. The third essay aims to analyze the determinants of firm relocation decisions. Using a panel dataset of manufacturing establishments in South Korea, a two-step decision making process of relocation (whether to relocate and where to relocate) is analyzed. Results indicate that inter-industry agglomeration attracts relocating firms, but intra-industry agglomeration and local competition discourages their entry. This pattern is more prominent among firms with prior experience of move(s), consistent with product life cycle theory. In general, sector-specific wage and land price discourages the entry of relocating firms, but multi-plant firms show less aversion to high own-sector wage, indicating that the wage of multi-plant firms could be more affected by other branches rather than local plants in their own sector. High sector-specific wage serves as pull factors for firms in high-tech and medium-high tech manufacturing sectors. This implies that local wage level in its own sector signals for the quality of local labor force, expected benefits from qualified labor input would exceed the cost in higher technology intensive industries. Large firms tend to have greater tolerance for relocation distances and land price, because they face more difficulty in finding premises satisfying their demand.