Highways and productivity: a firm level study of Spanish manufacturing

Using a micro level panel data set for Spanish manufacturing firms, I estimate the effect of access to highways on firm-level productivity. To estimate the causal relationship between firm level productivity and access to highways, I rely on different fixed effects specifications, instrumental variable estimation and controls for geography, geology and history. The results show that highways raise firm level productivity. Since highways also cause local density increases and density too affects productivity via agglomeration benefits, I also present estimations that control for local densities. This still yields a significant elasticity of productivity with respect to highway access of about 1.7%. The highway effect is robust to a variety of alternative specifications and estimation methods and shows that there is a significant positive direct effect of highways on productivity growth beyond the effect of density. Additional results show that benefits are unevenly distributed across sectors and space with evidence in support of important distributional effects of highway infrastructure.