Modelling the productivity impacts of inter-city connectivity
Lead Research Organisation:
University of Leeds
Department Name: Institute for Transport Studies
Abstract
The policy context is one in which inter-city connectivity is seen as an important stimulus to regional productivity. The Northern Powerhouse, for example, sees improved city connectivity as a means of creating economic growth and highlights the links between infrastructure and urban systems. Part of this growth will be through the growth in clusters of economic activity - i.e. increased specialisation at a city level. The economic literature identifies that transport can increase productivity through both increasing economic mass (agglomeration impacts) and through increased specialisation by cities. Increased specialisation occurs at an industry level, but also increasingly at a task level. This increase in productivity through increased specialisation is likely to be additional to transport user benefits calculated in a cost-benefit analysis. To date the treatment of agglomeration impacts have been well addressed in the literature. However the productivity impacts of inter-city connectivity have not been looked beyond an initial identification of the issues (see e.g. Venables (2013)). This knowledge gap will be addressed in this research by taking a whole systems approach and applying a system dynamics model.
The aim of the research therefore is:
- To develop an economic framework in which the impact of improved inter-city connectivity on productivity can be estimated;
- To develop a dynamic model of inter-city transport and economic movement including city specialisation, from first principles using a system dynamics approach
- To identify the level of additionality to transport user benefits in a cost benefit analysis that increased productivity through city specialisation will have from a theoretical perspective.
- To apply the model and new techniques to a relevant case study in the North of England
The aim of the research therefore is:
- To develop an economic framework in which the impact of improved inter-city connectivity on productivity can be estimated;
- To develop a dynamic model of inter-city transport and economic movement including city specialisation, from first principles using a system dynamics approach
- To identify the level of additionality to transport user benefits in a cost benefit analysis that increased productivity through city specialisation will have from a theoretical perspective.
- To apply the model and new techniques to a relevant case study in the North of England
People |
ORCID iD |
| James Laird (Primary Supervisor) | |
| David Pierce (Student) |
Studentship Projects
| Project Reference | Relationship | Related To | Start | End | Student Name |
|---|---|---|---|---|---|
| EP/N509243/1 | 01/10/2015 | 31/12/2021 | |||
| 1731836 | Studentship | EP/N509243/1 | 01/05/2016 | 30/04/2020 | David Pierce |
| Description | In this research we focus on the impact of inter-city connectivity on trade and specialisation. This includes investigating the potential for additional benefits arising from localisation economies which derive from increased density at the level of sectors/tasks which are not currently included in appraisal guidelines. The objectives of our research include understanding the dynamic processes of how inter-city connectivity impacts on economic activity, estimating the length of transition to a new steady state and calculating the level of additionality of benefits in an economic appraisal. We had a journal paper accepted for publication in 2019 the International Journal of System Dynamics Applications (IJSDA) which was published in Volume 8, Issue 4. In the paper we modelled the economic impacts of inter-city connectivity schemes using a stylised stock and flow model of two cities which we developed based on the system dynamics approach. The results of our modelling showed that labour and capital mobility costs limit the potential for increased specialisation through investment in inter-city transport and that further specialisation is more likely to arise when the scheme effects differ between sectors and between cities. Using our baseline assumptions we estimated that an unrealistic level of business user benefits would be required to move the two cities towards further specialisation. When higher trip rates were assumed in the more productive sector in each location the scale of benefits required to change the level of specialisation is smaller but still significant. This suggests that investment in transport links between cities for which there is potential for significant time savings could generate changes in specialisation such as when there are synergies between sectors in different cities and therefore a high number of business trips. There may also be scope for investing in links between cities which are further away for which time savings may be greater but there may be fewer business trips using such links and there is also the distance decay of urbanisation and localisation effects to consider. In addition, specialisation changes may result from an inter-city transport improvement if the existing links are poor and transport is acting as a constraint on business trips. We estimated the length of time of adjustment to a new steady state of maximimum specialisation in the two cities at 34 years. This is slightly longer than in other studies which have estimated sectoral adjustment times to changes in trade costs. In our analysis the urbanisation benefits due to the transport scheme were estimated as greater than localisation benefits if the transport scheme does not generate changes in specialisation. If the scheme leads to maximised specialisation then the potential localisation benefits were shown to be large and several times the level of urbanisation benefits. 2019-2020 Update: Over the past 12 months further modelling analysis has been carried out. This has involved undertaking static modelling which is the standard approach for estimating urbanisation benefits which derive from the increase in productivity resulting from higher economic density. We have extended the approach to include the estimation of localisation benefits which relate to the productivity impact of increased density at the level of sectors/tasks and changes in specialisation resulting from inter-city transport improvements based on the empirical evidence on changes in land-use in response to changes in inter-city connectivity. The main objective of this piece of work was to determine how relevant localisation economies are to the economic appraisal of inter-city transport schemes. The analysis has produced the following results: • Localisation benefits are approximately 50% of urbanisation benefits with fixed land-use for an inter-city scheme. This was based on applying parameters from the empirical literature on localisation and urbanisation effects. • Benefits from localisation and urbanisation effects are higher for shorter distances between cities. This suggests that even without taking into account the capital costs of inter-urban transport schemes which increase with distance it would be better to invest in improving links between places which are closer together. • If urbanisation benefits typically account for 10 to 15% of the total present value of benefits (PVB) of an inter-city scheme the inclusion of localisation benefits were estimated to increase the PVB by between 3.0% and 13.5% with fixed land-use and 3.2% to 17.5% with variable land-use. These estimates suggests that the incorporation of localisation benefits in an appraisal has the potential to positively affect the overall value money outcome of an inter-urban scheme. The scale of the increase in PVB would be sufficient to affect the outcome of a scheme with a marginal business case but they would not be high enough to transform the case of an inter-urban scheme which otherwise represents poor value for money. • Localisation benefits will be higher for inter-urban schemes which improve links between places with a greater proportion of jobs in manufacturing as the empirical evidence suggests localisation elasticities are higher in those sectors. This suggests that there may be scope for greater localisation benefits in countries with a higher proportion of employment in manufacturing industries such as in Eastern Europe and Asia. A case study is currently in progress on the proposed Northern Powerhouse Rail (NPR) scheme in the north of England. The aim of the case study is to test whether the results support our findings from the static modelling outlined above and to investigate whether there are any differences in undertaking analysis at the detailed level compared to the abstract level. |
| Exploitation Route | The findings from our research could be taken forward by policymakers and transport practitioners to inform the assessment of the economic impacts of inter-city transport schemes. We have been communicating with Transport for the North (TfN) who are currently examining the potential for benefits from changes in specialisation in response to future transport improvements in the North of England. We have already shared some of our research outputs with TfN and they have said they would like to reference our the PhD thesis in their future reporting. |
| Sectors | Transport |
| Description | The topic of the research is highly relevant to economic and societal impacts as it is focussed on modelling the economic impacts of inter-city transportation for which there is no complete method currently available. Many of the existing modelling tools available focus on city regions rather than links between places. Many of the impacts are likely to take place over long timeframes which are currently modelled coarsely in many models and some of the more detailed modelling methods which take account of the micro-foundations of trade and specialisation such as Spatial Computable General Equilibrium (SCGE) models are based on static rather than dynamic frameworks. Many inter-city transport schemes require significant capital investment and without dependable methods to assess their impact it raises policy questions about whether it is beneficial to invest in improving links between places. We have had a journal paper accepted for publication and we have presented the findings at international conferences and workshops. The research is co-funded by ARUP who we are in regular contact with and we have presented some of our findings to ARUP's transport economists in London who are involved in the assessment of transport schemes. 2019-2020 Update: We have been in contact with Transport for the North (TfN) who are interested in our research and have forwarded to them some of the research outputs. They subsequently forwarded these documents to the Department for Transport (DfT) and other contacts. TfN have agreed to reference the PhD thesis in their reporting of the potential for benefits from increased trade and specialisation due to transport investment. |
| First Year Of Impact | 2019 |
| Sector | Transport |
| Impact Types | Societal,Economic,Policy & public services |