Research Highlights Featured Chart

April 12, 2023

The cost of building highways

How much has the expense of infrastructure projects in the United States gone up?

Tyler Smith

Source: Bilanola

The United States spends billions of dollars a year on infrastructure, yet many still worry that current investments are not adequate to meet the country’s needs. 

In a paper in the American Economic Journal: Applied Economics, authors Leah Brooks and Zachary Liscow contribute to evidence on the cost trajectory of US infrastructure by documenting the growth in the per mile cost of building highways from 1956 to 1993.

Figure 5 from their paper shows a dramatic increase in spending per mile.

Figure 5 from Brooks and Liscow (2023)

The red line in the chart represents Interstate spending per mile based on annual state-level spending data and numerous other sources that measure the geographic, political, and legal determinants of costs. It shows that costs in the early 1990s were over four times more than costs in the late 1950s. 

One potential explanation for this surge is an increase in the price of the underlying components of highway construction, namely labor and materials. However, national measures of construction wages (solid blue line), total compensation per construction employee (dashed blue line), and materials prices (solid green line) remained stable over the period.

Instead, the cost increase was likely a result of rising incomes and greater input from citizens. As households’ resources increased, they were willing to pay more for highways with expensive features—such as noise walls, trenches, and overpasses—and pay more for building them in ways that were less disruptive to surrounding communities. At the same time, changes in legislation in the 1960s and 1970s gave US citizens more opportunities to voice their preferences and concerns. 

These findings suggest that if policymakers aim to bring down the cost of building highways, they should keep in mind the social value of higher quality construction and input from citizens.