13 September 2019

The “Highway Effect” on Public Finance: Case of the STAR Highway in the Philippines

Written by Asian Development Bank
Developed by Asian Development Bank
13 September 2019
In this study, the paper examines 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, they 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. The paper finds, 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.