Georgia Economic Impact of East-West Highway Phase 2 : Assessing the Impact of East-West Highway Investments on Exports through Gravity Modeling
The objective of this study is to assess the impact of the East-West Highway improvement program on Georgia’s ability to access international markets. As highlighted extensively in the literature, improving transport infrastructure and the efficien...
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| Format: | Report |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
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| Online Access: | http://documents.worldbank.org/curated/en/2016/06/26529815/georgia-second-phase-economic-impact-east-west-highway-investments-exports-through-gravity-modeling http://hdl.handle.net/10986/24668 |
| Summary: | The objective of this study is to assess
the impact of the East-West Highway improvement program on
Georgia’s ability to access international markets. As
highlighted extensively in the literature, improving
transport infrastructure and the efficiency of the logistics
sector can help countries gain competitiveness in
international export markets, which can translate into
faster economic growth and higher income. This study
hypothesizes that investments in the EWH have reduced the
cost of shipping Georgian goods to the rest of the world,
and such reductions should be more significant for goods
transported by road. To estimate the effect of cost
reductions generated by improvements in the EWH, a
gravity-type model in first-differences has been estimated.
The results show that: (i) a 10 percent increase in the
length of upgraded road network predicts a 1.1 percent
increase in exports transported by road while no significant
effect is estimated for exports on other transport modes
(rail, sea, and air); (ii) the resulting increase in exports
by road was reflected by a decrease in exports transported
by sea; (iii) the effect is statistically and economically
significant only for customs offices located along the EWH;
(iv) only exports of time-sensitive products responded
positively and significantly to improvements in the EWH
during the 2006-2015 period; (v) upgrading the entire EWH is
estimated to generate additional export revenues between USD
776 million and USD 1,466 million. It is important to note
that the overall trade generating effect of the investment
is expected to be somewhat lower as the results suggest some
substitution between road and sea transport, but the overall
impact is a significant boost to exports. |
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