Characterizing the relationship between road infrastructure and local economy using structural equation modeling

Road infrastructure is frequently cited as a critical catalyst for regional economic growth in transport policy research. However, it remains uncertain how the road infrastructure interacts with the local economic systems. Prior studies demonstrated that associations between the road infrastructure and local development were case-specific to some extent, and even contradictory conclusions could be generated. Simple quantitative or qualitative analysis, therefore, cannot effectively reveal complex interactions. This paper first proposes a conceptual model to theorize a transport-region economic relationship and then applies structural equation modeling (SEM) to explore the relationships between the road infrastructure and local economy, as well as the mediating factors. Using statistical data from 2005 to 2012, SEM models are established for two typical regions with different development levels in China: the Jiang-Zhe-Hu region (highly developed) and the Yun-Gui-Chuan region (less developed). This econometric approach, which emphasizes the economic mechanisms, confirms the efficiency of the SEM in this study. The results show that these two regions differ greatly in mediators for the influence of the road infrastructure on the local economy. The road infrastructure influences the local economy largely by attracting overseas investments and promoting real estate development in the Jiang-Zhe-Hu region. In the Yun-Gui-Chuan region, the road infrastructure impacts the local economy primarily by stimulating market openness. Such results confirm the hypothesis that the pathway for the influence of the road infrastructure on the local economy should vary with regions with different development levels. This paper is believed to provide new insights into transport-region research.