Wider economic benefits: when and if they should be used in evaluation of transport projects

In the early-mid 2000s, the CrossRail project in London demonstrated the increase in project net worth from adding Wider Economic Benefits (WEBs), in particular the benefits from agglomeration, as derived from the application of new economic geography. Since CrossRail and with the adoption of United Kingdom (UK) Treasury style ‘Business Case’ evaluations in Australia and New Zealand (NZ), the augmentation of benefits for WEBs in major transport evaluations has become the norm. Nevertheless, despite approaching ten years of ‘practice’, WEBs remain poorly understood and not universally accepted. The criticisms of WEBs largely concern the validity of the assumptions and their estimation and application in specific evaluations. For agglomeration benefits, there is confusion over ‘static’ versus ‘dynamic’ agglomeration, the concept of effective density, the direction of causality between transport interventions and agglomeration, the agglomeration elasticities and the measurement of transport cost. There is also insufficient understanding of the vertical structure of industries and the inter-relationships between economic activities including government. Dynamic agglomeration has, for modelling convenience, largely been assumed away. However the relationship between land use and density and constraints on land use can be argued to decouple the relationship between transport and the agglomeration. In NZ, static agglomeration WEBs have been accepted into the ‘official’ evaluation framework. In Australia, Infrastructure Australia’s framework requires the exclusion of WEBs in the central case evaluation with their inclusion as sensitivity tests to add ‘texture’. This paper reviews the basis and application of WEBs and summarises some of the major studies in Australia and NZ where they have been applied. The aim of the paper is to stimulate a debate on whether or not WEBs should be used, and help guide where further research could be undertaken to improve their accuracy and applicability.

• Record URL:
  http://atrf.info/papers/2016/index.aspx
• Authors:
  • DOUGLAS, N
  • O'Keeffe, B
• Conference:
  • Australasian Transport Research Forum (ATRF), 38th, 2016, Melbourne, Victoria, Australia
• Publication Date: 2016-11

Language

• English

Media Info

• Pagination: 21p
• Monograph Title: 38th Australasian Transport Research Forum (ATRF 2016), Melbourne, 16th - 18th November 2016

Subject/Index Terms

• TRT Terms: Costs; Economic development; Economics; Evaluation; Project management; Transportation corridors; Transportation operations
• Uncontrolled Terms: Transport costs
• Geographic Terms: Australia; New Zealand
• ATRI Terms: Economic development; Project evaluation; Transport corridor; Transport costs; Transport economics; Transport network
• ITRD Terms: 1116: Corridor (transp); 263: Economics of transport; 9020: Evaluation (assessment); 1154: Network (transport)
• Subject Areas: Economics; I10: Economics and Administration;

Filing Info

• Accession Number: 01627459
• Record Type: Publication
• Source Agency: ARRB
• Files: ITRD, ATRI
• Created Date: Feb 27 2017 10:11AM