Transport investments and spatial economic performance

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.

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.