Spatial impact of transportation infrastructure: A spatial econometric CGE approach

Abstract

This study introduces a new method called Spatial Econometric Computable General Equilibrium (SECGE), which integrates both spatial econometrics with computable general equilibrium modeling to improve the effectiveness of impact analysis on transportation infrastructure. Elasticities of factor substitution for the Constant Elasticity Substitution (CES) production function are estimated in a spatial econometric model with consideration of spatial dependence. CGE simulations adopting different substitution elasticities show a difference between spatial econometric estimation and traditional OLS estimation. Although the differences are relatively small in this aggregate case study, implications for more sensitive disaggregated regional models are clear.