Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/145397 
Year of Publication: 
2015
Series/Report no.: 
ADBI Working Paper No. 549
Publisher: 
Asian Development Bank Institute (ADBI), Tokyo
Abstract: 
In this study, we examine the impact of the STAR highway located in Batangas province, Philippines, on the public finance of the cities and municipalities through which it directly passes. Specifically, we exploit a unique, disaggregated dataset on tax (property and business taxes) as well as non-tax revenues (regulatory fees and user charges) of the cities and municipalities in the Batangas province. We find, based on our two specifications of a modified difference-in-difference model, that the STAR highway had a robust, statistically significant, and economically growing impact on business taxes. We also find that this so-called "highway effect" also extends to municipalities located in a neighboring province to Batangas. Furthermore, based on more careful inspection and robustness checks, it appears that the STAR highway had a significant impact not only on business taxes, but also on property taxes and regulatory fees. These findings support the widely held belief that infrastructure investments matter; further, our micro-case study suggests that infrastructure investments can indirectly boost tax and non-tax revenues through their power to reduce transportation costs and enhance the activity of firms and workers located along the highway.
Subjects: 
Infrastructure investment
public finance
STAR highway
JEL: 
H54
H71
O22
R11
Document Type: 
Working Paper

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