The Granger-causality between wealth and transportation: A panel data approach: Fid-Bau Portal

The Granger-causality between wealth and transportation: A panel data approach

Yetkiner, Hakan / Beyzatlar, Mehmet Aldonat

Abstract This study examines the causal relationship between wealth and transportation. The study first develops two alternating theoretical frameworks between wealth and transportation: one in which transportation is demand-driven and one in which transportation has dual role, demand-driven and supply-driving. Next, the study undertakes Granger-causality estimations for a panel of 18 countries over the period 1970–2017. It is found that the dominant Granger-causality relationship is bidirectional for majority of countries. The study also shows that there is high consistency in the Granger-causality relationship between wealth and transportation, and income and transportation. The study has three important contributions: First, the relationship between wealth and transportation is shown both theoretically and empirically. Second, transportation is shown to have dual role in an economy. Finally, it is shown that the wealth-transportation relationship and the transport-income relationship are equally robust and consistent.

Highlights • The dominant type of Granger-causality between transportation and wealth is bidirectional. • Transportation has a dual role in an economy, demand-driven and supply-driving. • The wealth-transportation and the income-transportation relationships are equally robust and consistent. • Transportation may act à la technological progress against the law of diminishing marginal physical product.