Is transport infrastructure construction a wise choice for stimulating economic growth in West China?

This paper explores the efficiency of policies designed to promote economic growth in West China, which is a relatively low productive part of China. It has devoted most of its public funds to financing transport infrastructure under the 'Western Development Strategy'. We use panel data from 12 western provinces during the period 1999-2009 to examine the economic returns and spillover effects of transport network capital stock in West China compared to other public sector capital stock in a spatial context. We found that both transport capital and other public capital have positive direct effects, and it seems that the returns to public investment are largely diminishing with development, but other public capital in West China has greater economic returns than transport network capital. Also, significant negative spillovers of transport network capital can be found, due to the migration of production factors. However, positive spillovers of other public capital can be captured for West China. Our results call into question the appropriateness of the current 'transport infrastructure-stressed' investment policies in the Western region.