How effective are policies aimed at integrating isolated regions? We answer this question using the construction of a highway system in one of the poorest regions in the United States. With construction starting in 1965, the Appalachian Development Highway System (ADHS) ultimately consisted of over 2,500 high-grade road miles. Motivated by a model of inter-regional trade we estimate the elasticity of total income with respect to market access, which we then use to evaluate the overall impact of the ADHS. We find that removing the ADHS would have reduced the total income by $45.9 billion or, roughly, 1 percent. Ultimately, the population response to improvements in transportation infrastructure reduced the gains in income per capita, which were equal to $515 (1.4 percent) in the poorest counties. Today, the region's performance relative to the national average is similar to its position in the 1960s. Thus, despite substantial investment in transportation and some gains in income per capita the region continues to lag behind the rest of the country.
↧