Spatial economic impact of road and railroad accessibility on manufacturing output: Inter-modal relationship between road and railroad

Despite the numerous attempts to quantify the benefits of transportation investments, little attention has been given to the variation of marginal economic impacts of the investment due to the interaction with existing transportation networks. This paper analyzes the spatial economic impacts of road and railway accessibility levels on manufacturing output, focusing on substitution and complementarity of the intra- and the inter-modal relationship. By estimating Translog production functions, we find that the improvement in railroad accessibility increases the marginal value added of local manufacturing industries associated with the change in road accessibility. The marginal value added with respect to the change in railroad accessibility increases by the level of railroad accessibility, resulting in increasing returns to scale. However, road accessibility can positively influence the marginal value added only with respect to the railroad variables, holding decreasing returns to scale. This implies that there is not a substitutive but a complementary relationship between the two transportation modes in terms of manufacturing output.