Highways and Globalization

This paper quantifies the value of US highways and their contribution in shaping regional specialization patterns and facilitating internal and external market integration. We develop a multisector general equilibrium model of interregional and international trade with many locations in the United States (i.e., counties) and many countries. In the model, producers choose shipping routes subject to domestic and international trade costs, endogenous congestion, and port efficiency at international transshipment points. We find that removing the Interstate Highway System reduces real GDP by $619.1 billion (or 3.9 percent) with one quarter due to reduced international market access. We also quantify the value of the twenty longest highway segments and find a range between $2.7 and $55.1 billion with I-5 being the most valuable. Our results highlight the role of domestic transportation infrastructure in shaping regional comparative advantage and gains from international trade.