How can transportation policies affect growth? A theoretical analysis of the long-term effects of alternative mobility systems

We present an example of how public policies affect the evolution of the economy by influencing consumption habits, life styles and work attitudes. In particular, we show that governments can boost long-run growth by moving public investment away from collective transportation systems and towards infrastructures necessary for using private vehicles. Indeed, by augmenting the relative convenience of using private mobility systems, which are those more costly for the households, the government induces them to increase their labour supply so as to afford larger expenditures in transportation. This has long-term welfare implications depending also on the negative externalities associated with transport.

► Transport services are provided by a public system or by the use of private cars. ► Individual transport choices are shaped by government investment in infrastructures. ► Private transport requires relatively more private expenditures. ► Government can boost long-run growth by investing more in private mobility systems. ► The long-term welfare implications depend also on transport negative externalities.