Highways and Globalization

This paper quantifies the value of US highways. We develop a multisector general equilibrium model 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 $601.6 billion (or 3.8 percent). We also show how to quantify the value of individual segments using our framework. The results highlight the role of domestic transportation infrastructure in shaping regional comparative advantage as well as the gains from intersectoral and international trade.