How Does the Health of Transportation Infrastructure Affect State Credit Ratings? An Empirical Analysis

Abstract

A well-developed and carefully maintained public infrastructure system is of critical importance to ensure that the economy can function effectively. To investigate the consequence of deficient public transportation infrastructure conditions on states' creditworthiness, this study constructs an infrastructure health index to measure the physical conditions of state highway transportation systems and empirically estimates the effect of the overall health of state highway transportation infrastructure on Moody's and Standard and Poor's state credit ratings by using a data set from 1999 to 2009. The empirical results indicate that the poorer the quality of a state's

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“…Actually, we take the quality of public highway infrastructure into account. 2 Drawing from recent literature (Chen, Kriz, & Wang, 2016; Heckman, 2015; Neshkova & Guo, 2013), three highway outcome variables are utilized. The first variable is state road quality, which is defined as the percent of acceptable roads in state-administered highway systems ( GoodRoads ).…”

“…The first variable is state road quality, which is defined as the percent of acceptable roads in state-administered highway systems ( GoodRoads ). Roads are in acceptable quality when their International Roughness Index (IRI) scores are less than or equal to 170 (Chen, 2014; Chen et al, 2016; Neshkova & Guo, 2013). The second is state bridge condition ( GoodBridges ), which refers to the percent of state-owned bridges that are not structurally or functionally deficient (Chen, 2014; Chen et al, 2016; Heckman, 2015).…”

“…Roads are in acceptable quality when their International Roughness Index (IRI) scores are less than or equal to 170 (Chen, 2014; Chen et al, 2016; Neshkova & Guo, 2013). The second is state bridge condition ( GoodBridges ), which refers to the percent of state-owned bridges that are not structurally or functionally deficient (Chen, 2014; Chen et al, 2016; Heckman, 2015). The third is state highway traffic congestion, which is measured by the percent of state-administered urban road miles that are congested ( RoadCongestion ).…”

“…To derive a statewide measure, this research uses the traffic Volume/Service Flow (V/SF) ratio, which measures the actual flow of traffic relative to a theoretical maximum amount of road carrying capacity. Roads are congested when their traffic V/SF ratios exceed 0.80 (Chen, 2014; Chen et al, 2016). Table 1 gives a summary of descriptive statistics for the inputs and outcomes of state highway infrastructure.…”

“…Roads are congested when their traffic V/SF ratios exceed 0.80 (Chen, 2014;Chen et al, 2016). Table 1 gives a summary of descriptive statistics for the inputs and outcomes of state highway infrastructure.…”