The paper investigates the feasibility of using a variant of the spatial equilibrium model to estimate the productivity effects of a specific infrastructure project in New Zealand.
Policy makers are interested in the marginal effects of infrastructure investment on productivity and an evaluation of such effects would provide a useful check on the appropriateness and adequacy of current decision rules and institutions.
To date, there appear to be no examples of using a spatial equilibrium model to estimate the productivity effects of a specific infrastructure project. However, the analysis in this paper suggests that such an approach is feasible. There is a range of data and estimation issues that needs to be addressed in the use of a spatial equilibrium model for this purpose, but we find that a reasonably useful range of data is available in New Zealand.
The next step in determining feasibility is to select a particular infrastructure project, and to develop an empirical model based on available data.