Granger-causality between transportation and GDP: A panel data approach

• We investigate panel Granger-causality between income and transportation.
• EU-15 countries, which are also OECD members are examined for the period 1970–2008.
• Three different transportation variables are used.
• Our findings indicate that the dominant type of Granger-causality is bidirectional.
• We find that there is an endogenous relationship between income and transportation.

This paper investigates the Granger-causality relationship between income and transportation of EU-15 countries using a panel data set covering the period 1970–2008. In the study, inland freight transportation per capita in ton-km (TRP), inland passenger transportation per capita in passenger-km (PAS), and road sector gasoline fuel consumption per capita in kg of oil equivalent (GAS) are used as transportation proxies and GDP per capita is used as measure of income. Our findings indicate that the dominant type of Granger-causality is bidirectional. Instances of one-way or no Granger-causality were found to correspond with countries with the lowest income per capita ranks in 1970 and/or in 2008. Although we conclude that there is an endogenous relationship between income and transportation, this is not observed until after an economy has completed its transition in terms of economic development.