Public Investment in the Transportation Sector and Economic Growth in Iran (1970-2008)

Transportation sector is an important part of a production and consumption cycle. The expansion of transportation leads to increase the activities of the labor and capital and creates positive externalities for other economic sectors. Therefore, it has an important role in the process of economic growth. This paper investigates the effect of government investment in the transportation sector on economic growth during 1973- 2009 in Iran. For this purpose, an Auto Regressive Distributed Lag (ARDL) model will be developed. Our findings show that, in short-term., investing in transportation has a significant positive effect on GDP. In long-run, GDP elasticity to public investment in transportation is a significant positive value equal to 0.08. Then, by positive effects mentioned above, we recommend more and more governmental investment in this sector.