Economic development, transport investment, and urbanization in Mexico: causality and effects

Vicente German-Soto Alexsandra De la Peña Flores Karina García (2023, [Artículo, Artículo])

The transport investment is often used as a tool for economic development and urbanization. However, there is still debate about whether transport improvements promote development and urbanization or, conversely, these latter create the conditions that stimulate the transport. In theory, the transport system contributes to development and urbanization because it speeds up the exchange of goods and services, but the effects can also be reversed, so the direction of causality is not so easily identified. This work uses Mexican state information of the 1988-2018 period, grouped as panel, to know both magnitude and direction of the impacts. Methodology consists in cointegration tests and VECM regressions. The results reveal that long-term causality goes from economic development to transport and its subsectors, which means that economic development is a necessary condition to modernize transport in Mexico. For urbanization, the causality and magnitude of the effects vary depending on the transport subsector. The total economy and passenger sector’s investments cause urbanization, but transportation and subsectors of cargo carriers and communications estimate two-way causality. The conclusions suggest that urbanization depends on improvements in transportation and the latter, in turn, on economic development.

Desarrollo regional Transporte Economía urbana Causalidad Modelo VECM CIENCIAS SOCIALES CIENCIAS SOCIALES Economic development, Granger-Causality, VECM Models, Productivity, Urban Economics