United States Department of Transportation
i
Application of Region Specific Depreciation Formulas in Highway Capital Stocks: Evidence from New York and New Jersey
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2018-08-01
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By Kalan, Onur
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Abstract:Highways are significant instruments for transportation in United States, and the common opinion is that increasing highway networks leads to major changes in economic development. In general, the quantification of the highways is performed by capital stock approach in monetary terms. In capital theory, the increase of the stock value can be calculated by gross investment values. On the contrary, deduction is performed with the assumption of different depreciation patterns which their representations of the real deduction in the assets have been questioned. This paper provides an empirical evaluation that focuses on the representability of new depreciation patterns which are derived from the deterioration functions of New Jersey State bridge decks. This study measures the Gross County Product (GCP) change between 1999 and 2013 in 18 counties of NY/NJ regional area in an econometric model with geometric depreciation pattern and proposed 22 new depreciation patterns. The results show that an increase in highway capital stock has a significant and positive impact on economic growth in the region. The models are used in the forecast of year 2016 GCP values of each county. Although some of the counties in the models do not reflect significant improvement in the new depreciation models, some of the counties show an observable decrease in the estimation errors. It is indicated that in the counties where the models give positive improvements, the new depreciation patterns can be used as a tool to estimate more precise GCP values for policy makers.
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