Transport capital and regional economic performance in Korea: Implications for balanced regional development under the public investment appraisal system

In 1999, Korea introduced the Preliminary Feasibility Study (PFS), a mandatory appraisal framework for large-scale public investment projects that designates balanced regional development as a core policy objective. As the primary gateway for major public construction projects, the PFS plays a pivotal role in shaping the scale and spatial allocation of transport investment, yet empirical evidence on whether it is associated with reduced regional economic disparities remains limited. Using panel data for 15 Korean regions from 2000 to 2023, this study estimates output elasticities of transport capital with a multilevel Cobb-Douglas framework that allows road and railway elasticities to vary by region and accounts for temporal dependence in the residuals. The results reveal substantial regional and modal heterogeneity: road elasticities average about 0.12 and are highest along the Seoul-Busan corridor, while railway elasticities average about 0.15 and are highest in the Seoul metropolitan area and the adjacent Chungcheong corridor. By contrast, several less developed regions, including areas prioritised by the PFS balanced development component, exhibit generally positive but low elasticities for both modes. These uneven productivity returns suggest that transport investment alone, as shaped by the PFS, is unlikely to resolve Korea’s interregional economic disparities, underscoring the need for complementary, place-based policies tailored to regional industrial structure and absorptive capacity.