Ann Reg Sci (2012) 48:819–838 DOI 10.1007/s00168-010-0409-1 ORIGINAL PAPER On the regional incidence of highway investments in the USA Alfredo M. Pereira · Jorge M. Andraz Received: 10 January 2008 / Accepted: 25 August 2010 / Published online: 7 September 2010 © Springer-Verlag 2010 Abstract The objective of this paper was to investigate the regional incidence of the aggregate effects of investment in highways in the US taking into consideration the presence of regional spillovers. The empirical results are based on VAR estimates at both the aggregate and state levels using output, employment, and investment, as well as different measures of highway investments. Empirical results allow us to establish several stylized facts. First, investment in highways affects private sector variables positively at the aggregate level as well as in most states. Second, the regional spill- over effects are very significant for all private sector variables. Third, these spillovers have a clear geographical pattern in that they tend to be more important in western states and the corridor between the Great Lakes and the Gulf Coast. JEL Classification C32 · H54 · R53 1 Introduction While there is little doubt that public investment should have a positive effect on private sector performance there is little agreement as to the magnitude or significance of such A. M. Pereira (B ) Department of Economics, College of William and Mary, Williamsburg, VA 23187, USA e-mail: ampere@wm.edu J. M. Andraz Faculdade de Economia, Universidade do Algarve, Faro, Portugal e-mail: jandraz@ualg.pt A. M. Pereira · J. M. Andraz CASEE Centre for Advanced Studies in Economics and Econometrics, Universidade do Algarve, Faro, Portugal 123