Transportation Productivity and the US Economy, 1947–2017
![This figure is a map of the United States titled "Improvements in Transportation and Regional Gross Output, 2017". The map shows percentage changes in regional gross output compared to 1947 levels, with values displayed for different regions across the country. The data is color-coded into four categories: • Dark blue: (+20%, +30%] showing highest growth • Medium blue: (+10%, +20%] showing moderate growth • Light blue: (0%, +10%] showing slight growth • Gray: (-5%, 0%] showing decline Key regional values include: • Highest growth in the northern plains (Montana/Idaho) at +24.9% • Strong growth in Texas and surrounding western areas at +17.2% • Decline in northeastern states ranging from -1.1% to -3.7% • Central states showing moderate growth (+1.9% to +6.7%) A legend in the bottom right shows the four color-coded categories for output changes relative to 1947. A note beneath the map indicates that "Estimates are relative to holding transportation productivity at its 1947 level." The source line reads "Source: Researchers' calculations using data from multiple sources and surveys."](/sites/default/files/inline-images/w33248.jpg)
Over the past century, transportation costs have fallen dramatically, yielding substantial economic benefits. In The Long-Run Effects of Transportation Productivity on the US Economy (NBER Working Paper 33248), A. Kerem Coşar, Sophie Osotimehin, and Latchezar Popov demonstrate how improved transportation efficiency has enhanced trade and boosted GDP.
Rising productivity in the US transportation sector over the last 70 years has added 3 percent to GDP.
The freight transportation sector saw remarkable gains in multifactor productivity — output growth beyond direct input increases — of 59 percent from 1947 to 2016, compared to 32 percent in other sectors of the US economy. This progress stemmed from several advancements, including the widespread adoption of motorized transport, interstate highway construction, and innovations in logistics.
To analyze these impacts, the researchers develop a multi-region model of the US economy in which transportation services are an essential input to delivering goods within and across regions. Their calibration relies on data on interregional trade flows from the Bureau of Transportation Statistics Freight Analysis Framework as well as data on production, employment, investment linkages, and input-output relationships between sectors from the Bureau of Economic Analysis.
The calibrated model suggests that transportation productivity improvements increased real GDP by 3.3 percent — an impact 2.3 times greater than would be expected based on freight transportation’s share of economic value added. This multiplier effect extends beyond that coming from typical input-output relationships, arising instead from the complementary role of transportation services for trade and its stimulus effect on capital accumulation.
The benefits of improved transportation varied significantly across sectors and regions. Labor productivity grew most substantially in mining, agriculture, and manufacturing, with smaller gains in services. This increase primarily resulted from reduced shipping costs, which allowed firms to use more traded intermediate inputs. Labor productivity gains were largest in sectors that rely on intermediate inputs with high initial shipping costs.
Geographically, the Mountain and Central regions benefited most from transportation improvements, while the Northeast experienced relative declines in output and population that were amplified by transportation improvements. These shifts help explain long-term population and economic activity movements across US regions. Additionally, reduced transport costs encouraged regional specialization based on comparative advantages.
— Whitney Zhang
This research was supported by the University of Virginia Quantitative Collaborative and the Canadian Social Sciences and Humanities Research Council.
