Returns-to-scale observations in state transportation expenditures and revenues

Abstract: In any country, the sizes of the constituent jurisdictions (provinces, states, regions) often vary significantly, and subsequently, so does their physical transportation inventory (lanes-miles of roadway) and amount of travel (vehicle-miles of travel). Larger jurisdictions typically have larger inventory sizes and higher levels of travel. The levels of transportation spending and generated revenues generally increases with the inventory size and the amounts of travel, respectively. What is not certain, however, is the existence of any economies of scale that would engender non-linearity of such a relationship. Further, another source of uncertainty is the nature of second order non-linearity, that is, the relationship (a) between spending normalized by the inventory size on one hand, and the inventory size on the other hand, (b) between revenues normalized by the amount of travel on one hand, and the amount of travel on the other hand. Using data from Federal Highway Administration’s Highway Statistics Series, this paper investigates these issues. The findings are expected to throw light on the higher magnitudes of challenges faced by smaller transportation agencies in terms of their infrastructure spending and revenue generation. This could provide justifications for adjustments in any efforts towards comparative analysis of agency performance or efficiency.