The Spatial Impact of Local Infrastructural Investment in New Zealand

In this paper we estimate the impact of local authority infrastructure spending in New Zealand using spatial econometric modelling, with the infrastructure spending itself endogenously determined. Utilizing data from the New Zealand Census and Local Authorities Finance data (1991-2008), aggregated to functional labour market areas, we formulate a simultaneous equations growth model of real income, population, land rent and public infrastructure investment. Estimation is conducted using a spatial 3SLS procedure. We find that an increase in local infrastructure spending increases population growth, real income and land values, but is itself endogenous and spatially correlated.