Transport investments and spatial economic performance

Lead Research Organisation: London School of Economics & Pol Sci
Department Name: Spatial Economics Research Centre

Abstract

The research is seeking to understand the implications of transport investments for the spatial economy by identifying effects on workers and firms (e.g. productivity, employment, wages). The research will provide the first evidence on these impacts using actual transport improvements and a key aim of the project is to assess the implications of our findings for (DfT) scheme appraisal.

Data describing the characteristics of workers and firms have been constructed from the Annual Survey of Hours and Earnings and the Annual Respondents Database. The data allows us to follow individuals and firms over time and uncover the impact of transport by observing what happens when infrastructure changes or when workers or firms move to places with better transport access. We have already produced preliminary results for the effect on firms. To do this we use a variety of econometric techniques that have proven successful in other contexts. The panel dimension of the micro data is ideal for the issues we propose to investigate. It will allow us to control for unobserved individual and/or firm effects and time trends, allowing us to address issues of endogeneity which are frequently encountered in assessing the impact of transport provision.

Existing studies typically represent transport innovations in financial terms (i.e. expenditure) or in physical quantities (i.e. lane miles). Evidenced reviewed under the Eddington study shows that these measures may provide poor approximations to investment 'quality' because the financial and physical size of investments does not equate to the network performance improvement achieved. Our empirical work will seek to estimate the effects of investment on road network performance and identify which types of investment generate the biggest increases in performance. This will allow us to better understand how increased connectivity between places affects productivity.

Planned Impact

There is very little international evidence on the effects of transport infrastructure improvements on economic outcomes, and none for the UK. This research will provide the first ex-antepost estimates of the effects of transport accessibility changes on a range of outcomes using micro data. This will represent a considerable advance on existing research and we would expect to be able to publish our findings in leading field journals. The potential findings are self-evidently of crucial importance to policy makers concerned with the effects of transport investments - both road and rail - on the labour market choices and outcomes of individuals, output and relocation of firms, and spatial aspects of economic development more generally. The existence and magnitudes of such effects continues to be of significant interest to DfT and government more generally (see recent announcements around HS2). Our findings will allow DfT to improve the advice it gives on scheme appraisal and provide better guidance on wider impacts of transport.
We will use existing relationships with CEP and SERC to engage with user groups through publication and other knowledge dissemination activities.
 
Description The project provides empirical analyses of the effects of transport infrastructure improvement on economic performance, in Britain and international settings. The British strand of the work is the first to provide evidence on the overall impact of the recent road transport programme on economic performance. It links data on all new major roads constructed in Britain between 1998 and 2008 to firm and worker data, and examines to what extent roads affected employment, productivity work hours and wages. We find that new roads, which increase the accessibility of workplaces, boost local employment through entry of firms into an area, and raise wages and work hours. Looking further at road transport, we study the relationships between urban road infrastructure investment, traffic volumes, delays and economic output in US urban areas. The study shows that increases in road capacity induce increased traffic volume and congestion, but that these higher traffic volumes enable higher output. In other words, new roads do not relieve congestion, but do stimulate economic output. Accessibility by road in urban areas in the US is also found to be associated with greater productivity, potentially due to the 'agglomeration' benefits arising from close connection between firms and between firms and workers. In contrast, a study of the impact of new High Speed rail lines in Spain after 2005 finds no evidence that expansion of the high speed rail network had any effect on output (value added per capita) of regions that received new rail lines, relative to regions in Portugal and elsewhere in Spain that did not.
Exploitation Route All the results from this project have implications for transport policy, by providing guidance on the economic benefits of transport infrastructure to local economies. In particular the reports on the effects of road transport improvements in Britain and high speed rail in Spain have clear messages on the economics benefits (or not) of transport infrastructure policy. The other work provides more nuanced lessons on the potential role of transport in improving regional economic performance. The work will be generally relevant to organisations involved in the evaluation and implementation of transport policy including Department of Local Authorities, Network Rail, Highways Agency, Transport Scotland, Welsh Assembly Government and private sector transport planning consultants.
Sectors Communities and Social Services/Policy,Construction,Government, Democracy and Justice,Manufacturing, including Industrial Biotechology,Transport

URL http://www.spatialeconomics.ac.uk
 
Description Driving up wages : the effects of road construction in Great Britain 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Public/other audiences
Results and Impact Paper at University of Valencia seminar

Questions and comments from an international academic audience
Year(s) Of Engagement Activity 2012
 
Description Driving up wages : the effects of road construction in Great Britain 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Public/other audiences
Results and Impact Paper at Finnish Government Institute for Economic Research (VATT) seminar

Questions and comments from an academic and policy-oriented audience
Year(s) Of Engagement Activity 2012
 
Description Driving up wages : the effects of road construction in Great Britain 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Public/other audiences
Results and Impact Paper at 2nd European-UEA Meeting in Bratislava, Slovakia

The presentation prompted questions and interest from academics in urban, regional and transport economics.
Year(s) Of Engagement Activity 2012
 
Description Driving up wages : the effects of road construction in Great Britain 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact Paper at 1st Secure Data Service anniversary at BIS Department, London

The presentation prompted interest and questions from central government representatives.
Year(s) Of Engagement Activity 2012
 
Description Driving up wages : the effects of road construction in Great Britain 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Public/other audiences
Results and Impact Paper at 2nd IEB Workshop in Urban Economics

Questions and comments from an academic audience
Year(s) Of Engagement Activity 2012
 
Description Driving up wages : the effects of road construction in Great Britain 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach Regional
Primary Audience Participants in your research or patient groups
Results and Impact Paper at the 7th RES PhD Presentation Meeting will be held at Queen Mary University of London, Mile End Campus, London http://www.res.org.uk/view/2012postgraduateJob.html

http://www.res.org.uk/view/2012postgraduateJob.html
Year(s) Of Engagement Activity 2012
URL http://www.res.org.uk/view/2012postgraduateJob.html
 
Description Driving up wages : the effects of road improvements in Great Britain 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach Local
Primary Audience Participants in your research and patient groups
Results and Impact Paper at LSE Geography Economics Cluster seminar

Questions from an academic audience
Year(s) Of Engagement Activity 2011
 
Description New road infrastructure : the effects on firms 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Public/other audiences
Results and Impact Paper at University of Birmingham, Department of Economics Research Seminar

Questions and comments from an academic audience
Year(s) Of Engagement Activity 2012
 
Description New road infrastructure : the effects on firms 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Public/other audiences
Results and Impact Paper at Paris School of Economics, Regional and Urban Economics Seminar - RUES

Questions and comments from an international academic audience
Year(s) Of Engagement Activity 2012
 
Description New road infrastructure : the effects on firms 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Participants in your research and patient groups
Results and Impact Paper at LSE Labour Economics Workshop

Questions and comments from an academic audience
Year(s) Of Engagement Activity 2012
 
Description New road infrastructure : the effects on firms 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact Paper at Productivity Effects of Transport Infrastructure Investment Workshop, CPB Netherlands Bureau of Economic Policy Analysis

Questions and comments from an international policy-oriented and academic audience.
Year(s) Of Engagement Activity 2012
 
Description New road infrastructure : the effects on firms 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact Paper at Ministère de l'Écologie, du Développement Durable et de l'Energie in Paris

The presentation prompted questions and interest from representatives of the French government and other academics.
Year(s) Of Engagement Activity 2012
 
Description Synthesis of the findings 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach Regional
Primary Audience Policymakers/politicians
Results and Impact Presentation of a synthesis of the findings from "New road infrastructure : the effects on firms" and "Driving up Wages: Driving up wages : the effects of road construction in Great Britain"

The presentation prompted questions and interest from central government departments.
Year(s) Of Engagement Activity 2012
 
Description Synthesis of the findings 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact Presentation of a synthesis of the findings from "New road infrastructure : the effects on firms" and "Driving up Wages: Driving up wages : the effects of road construction in Great Britain" at Seminar for Heseltine Growth review

Questions and comments from a poliy/central government audience and input into the findings of the Heseltine Growth Review
Year(s) Of Engagement Activity 2012
 
Description Synthesis of the findings 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact Presentation of a synthesis of the findings from "New road infrastructure : the effects on firms" and "Driving up Wages: Driving up wages : the effects of road construction in Great Britain" at City Deals seminar

Questions and comments from a policy-oriented audience.
Year(s) Of Engagement Activity 2012
 
Description Wider economic benefits of transport investment and the role of agglomeration economies 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact This talk will provide an overview of the measurement of wider economic impacts in transport appraisal focusing in particular on the role of agglomeration economies. It will describe how agglomeration effects can be estimated and included within a standard Benefit Cost Analysis framework to assess the productivity benefits of investment. Examples from around the world will be used to illustrate the potential significance of agglomeration externalities. The talk will discuss limitation of the existing approach, particularly in relation to econometric modelling, and will suggest future areas for research.

Questions and comments from a policy-oriented audience and input into practical cost benefit analysis of transport projects
Year(s) Of Engagement Activity 2012