Abstract
The development of road infrastructure works as one of the most important inputs of production and overall economic activities all around the global economics. The developed countries of the west hold the larger road lengths in both gross and per capita terms compared to the less developed and emerging countries. But it is also undeniable that the less developed emerging countries have been growing fast in this respect or rushing to catch with the developed countries. The present chapter, hence, tries to study the modes of growth and convergence of GDP per kilometer of road length across the 30 selected countries for the period of 1990-2011 by means of ? convergence and also try to estimate the cross country inequalities by means of Gini Coefficients. It observes a sign of ? convergence and the inequality are going down over time, although there are some signs of divergences in some of the short time spans.
TopIntroduction
Physical fitness of human beings depends on their clean or unblocked artery system through which blood circulation becomes smooth in the entire body. Humans do not survive if the artery system does not allow blood to circulate and transport nutrients as per requirements. In a similar way, nation cannot grow faster unless it has a smooth and sufficient square area of road network. Road-network is supposed to be the artery system of a nation that matters much to reduce the distance factor between two points of a nation in particular. We often talk about the death of distance in the era of globalization and hence road-network plays an important role to reduce the troubles distance factor as well as communication; facilitate trade, transport, integration and, in turn, economic growth and development. The ratio of square area of roads to the total square area of a city of a nation is an index for improving not only the living conditions of common people but also supplements market integration. Urban people are in a well off position in normal stage compared to the people residing in rural belt in developing nations in particular. Road-web is a basic infrastructure which is directly linked to the up-graded marketing system of all types of goods and services. Newly constructed roads may persuade development in previously undeveloped areas; significantly affecting sensitiveity of the lifestyles of indigenous people. The majority of poor people in the world live in rural areas and the level of public infrastructure in terms of road-facility are of low quality. Increased road capacity and better quality of pavements can reduce travel times and lower the fuel costs of vehicle used. The benefits of increasing access to the markets, jobs, education facilities, health services and reducing transport costs for both freight and passengers are pronounced. According to data on the United States, Queiroz and Gautam (1992) observed that the country accounts for 15 per cent of its Gross National Product and 84 per cent of all spending on transportation activities.
Infrastructural developments in the road network have so many positive effects upon the socio economic structure in any economy. According to the OECD Report (2002) on impact of road on regional development, the main direct user benefits are travel time, vehicle operating or fuel efficiency and safety. Travel time savings are usually regarded as the largest economic benefits of transport infrastructure investment. This is known as ‘Accessibility’. Improvement in accessibility would increase the market size for agriculture, manufacturing, tourism and/or labor sectors, leading to increased competition. Besides it has many spillover effects on the economic and social variables, likewise the effects on employment, efficiency and social inclusion. The impacts of construction, operation and maintenance of transport infrastructure on employment include both created and relocated jobs. Direct and indirect employment linked to the operation and maintenance of transport infrastructure is largely related to the level of traffic. Wider access to the market would create both new business opportunities and increased competition, leading to further increases in profitability which will again lead to increase in factor productivity and efficiency. Increased access to road network to all sections will make the inclusive social benefits that have a long term positive effect in terms of social welfare.
All weather roads are the one of the vital conditions to improve the socio economic condition of a country. According to the World Bank data, in India total road network of over 4865000 km in metal road in 2014, the second largest road network in the world just after USA with 6586610 km. At 1.48 km of roads per square kilometer of total geographical land the quantitative density of India’s road network is far higher than that of the United States (0.65), China (0.46), Brazil (0.20), Russia (0.08), Canada (0.10) and Australia (0.11).
Recent scenario reveals that backward countries are investing now a large part of their GDP upon building road network and trying to catch up developed countries in this regard. Since already established fact that road network has a positive impact upon the GDP of a country, the GDP per kilometer (KM) of road or GDP-road length ratio become a significant determinant in judging whether road is affecting GDP. The countries of the backward regions have been also growing in terms of the GDP per KM of road network and it would, in turn, help to catch up with developed nations.
Key Terms in this Chapter
Developed Countries: The status of development of a country is usually judged by different criterion involving economic, political and social parameters that ensure the power of a country. One such criterion is income per capita. A country with high gross domestic product per capita can be described as developed. Another economic criterion is industrialization; a country in which the growth and share of tertiary and quaternary sectors of industry dominate can also be described as developed. Besides, the important social variable for which a country is considered as developed is high human development index that covers literacy rates, gender unbiasedness and empowerment, falling mortality rates, among others. The list of countries included in the list of developed or high incomes countries of the study are borrowed from the classification of the World Bank and the United Nations.
Developing Countries: A developing country, also called an emerging or transitional economy with middle and low income base, is a nation with an underdeveloped industrial base, and low Human Development Index (HDI) relative to other countries. On the other hand, since the late 1990s developing countries tended to demonstrate higher growth rates than the developed ones along with other sectors of social developments. According to the UN, a developing country is a country with a relatively low standard of living, undeveloped industrial base, and moderate to low Human Development Index Employment share in agriculture sector is very high, it could be 60 to 70 percent whereas it becomes 5 to 7 percent in developed nations.
GDP: It is the sum of monetary values of all goods and services produced within a territory of a country in a given year. The prices used here is the current prices. The World Bank measures it in terms of US$. It is one of the main determinants of a country’s overall development whenever it is converted into per capita terms.
Road Infrastructure: It consists of the installation of fixed assets including surface roads and railways and terminals such as bus stops, trucking terminals, railways stations. Operations of vehicles along these transport systems make the travel time to reduce and generation of employment in the sector which in aggregate influence the aggregate demand for goods and services that ultimately leads to increase in GDP and overall development.
Gini Coefficient: The Gini co-efficient or index is a mathematical device used to compare income distributions, besides other variables like wealth, consumption, infrastructure, etc. over time and across economies or regions. The Gini co-efficient can be used in conjunction with the Lorenz curve. It is calculated by comparing the area under the Lorenz curve and the area from the 45 0 line to the right hand and the horizontal axis. Alternatively, it can be quantified by the taking into account the summation of absolute differences of all pairs of the concerned variable which is normalized by dividing by both population squared (so there are ‘n’ square number of such pairs) and by mean. If the computed value of G is equal to one then it is said that there is extreme inequality or Absolute Inequality and if G is equal to zero then it is the notion of Absolute Equality. Higher value of G implies greater inequality among the countries.
GDP per km: It is the ratio of the gross domestic product in current prices (in US$) and total length of the road in KM with no specifications of the width of the roads. It may be treated as the contribution of one KM road length on the GDP level of a country in a given year. Usually it is thought that increase in the developments of the road length supplements the income of a country to rise since road development or additional road construction considered as the development in infrastructure like other investments in the infrastructure sector.
? Convergence: The concept of ? convergence measures how the ranks of the countries change over time through a proper index which is known as rank concordance index. The concept of absolute ß convergence is not unbiased and s convergences, although unbiased, is not a general concept of convergence. The concept of ? is considered as the better approach of measuring inter-country convergence. If the values of ? tend towards zero then we can say that the backward countries are catching up with the advanced countries and the corresponding inequalities across the countries are going down. For detail see the methodology section.
Inequality: Inequality refers to the measurement of imbalance or unequal distribution in a system, which may be social, economic, political, diversity, etc. In economics, it refers to how economic metrics are distributed among individuals in a group, among groups in a set of population, or among countries. Economists generally reckon about three broad areas of economic disparity. They are with respect to wealth, known as wealth inequality, income or income inequality and consumption or consumption inequality. Inequality of outcome from economic transactions occurs when some individuals gain much more than others from an economic transaction. Inequality of opportunity occurs when individuals are denied access to institutions or employment, which limits their ability to benefit from living in a market economy.