Recent reports such as these have once again raised the question of whether we can stimulate economic activity — locally, regionally or nationally — through infrastructure investment, rather than simply targeting it to meet underlying demand. This question is central to our understanding of the role of transport investment in improving local economic growth and is the main focus of our review. There are two ways of structuring our thinking about the likely economic impact of infrastructure investments. The first views public sector infrastructure investment as providing a capital stock that is complementary to private sector physical capital i.
Economic Effects of Investment in Transportation
The second thinks of infrastructure as providing a network that connects different places so that public sector investment reduces the transport costs between places. The first way of thinking suggests that providing more infrastructure will always improve area level productivity Jones, Of course, infrastructure can be very expensive so these productivity benefits might be outweighed by the costs of provision. This disparity between productivity benefits and costs may be particularly acute when infrastructure is used to try to turn around struggling local economies.
Because infrastructure is durable, places that have seen slow growth will tend to have relatively large amounts of infrastructure per person. The concrete manifestation of this are relatively low congestion levels in poorly performing cities. Economic theory — supported by empirical evidence - suggests that adding further transport investment in those places may not do much to improve productivity. In contrast, investing in congested places will tend to deliver higher returns because the congestion reflects the fact that these places have low infrastructure per person.
The second way of thinking about infrastructure — as a network that connects different places — provides more mixed messages; particularly when it comes to better connecting rich and poor regions regions Baldwin, et al; One way to think about these types of transport investment is to view enhanced integration as a way of increasing the effective size of the local economies.
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As a larger local economy means higher agglomeration economies this should help firms be more productive. There are two important caveats concerning this line of reasoning. First, the available empirical evidence suggests that agglomeration economies may attenuate quite quickly with distance.
It is not clear, therefore, whether connecting different cities will always generate significant agglomeration benefits. Second, lowering transport costs may encourage firms to move into the richer market and serve their customers from there. Theoretical analysis certainly urges caution in assuming that infrastructure investment can stimulate growth in poorly performing areas.
Journal of Transport and Supply Chain Management
In short, while infrastructure investment may be vitally important for growing cities, its role in stimulating growth is not as clear-cut as assumed by many decision makers. Transport improvement projects are broad in scope, not only in terms of the transport mode see below , but also in terms of the type of interventions. Three broad types of interventions were considered as part of this review:. To help order the large amount of literature around 2, policy evaluations and evidence reviews , studies were split by mode as follows:.
Our transport report covers evidence on roads, rail including light rail and subways , trams, buses, cycling and walking — areas of expenditure which account for the majority of transport spending that will be considered by local decision makers. Transport Why transport? Evidence review Evidence gaps Toolkit Evaluating Transport.
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Transport Transport can have a positive impact on the local economy, although the role of transport in stimulating growth is not as clear-cut as assumed by many decision makers. Share Page Close Share this page Why transport? Sign up to our Newsletter. Economic Impact Analysis. Perspective and Scope. Defining Alternatives.
Geographic Scope. Level of Effort. Project Description. Project Schedule. Analysis Purpose. Project Objectives and Impacts. Time Period of Analysis. Issues to Consider. Valuing Accidents. Change in Accident Rates. Total Accident Value. Prioritizing Projects. Greenhouse Gases. Estimating Induced Travel. Evaluating Benefits.
Looking at Infrastructure Investments to Boost Economic Growth | EfficientGov
Further Reading. Reliability and BCA. Measuring and Estimating Noise.
Noise Abatement. Very Large Projects. Construction Disbenefits.
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Parking Costs. Equity and Option Value Benefits. Initial Costs. Continuing Costs.
Rehabilitation Costs. End of Project Costs. Benefit-Cost Ratio. Net Present Value.
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