Public Infrastructure Impacts on U.S. Agricultural Production: A State-Level Panel Analysis of Costs and Netput Composition

Abstract

In this study we consider the potential for public infrastructure investment in the transportation (highway) network to enhance the productivity of the U.S. agriculture sector. Using state level panel data for 1960–1996 we measure cost-saving shadow values for public infrastructure (G). the analysis is based on a cost function model of land, labor, capital, fertilizer, pesticide and “other” material input demands, which is augmented by pricing equations for crop and animal outputs to reflect profit maximization. We also distinguish the input- and output-specific components of the shadow value measures, and their implications for netput compositional changes. the results indicate that infrastructure investment generates cost-savings benefits from substitution for all inputs, with land-using and materials-saving biases. in addition, G expenditures are found to generate larger marginal benefits for animal outputs than for crops.