NETWORK BENEFITS FROM TRANSPORT INVESTMENTS UNDER INCREASING RETURNS TO SCALE. A SCGE ANALYSIS

In a first-best best economy benefits from an improvement in a transport network may be measured completely by the change in consumer surplus under the general equilibrium transport demand curve on the improved link. This result is confirmed in a numerical three region SCGE model. However, impacts of distortions represented by increasing returns to scale are also considered in the paper. The extent to which benefits to traffic in this second-best case captures the welfare effects of the improvement is analysed. It is found that only if increasing returns prevail in the two regions directly connected by the improved link is it necessary to consider benefits beyond those measured on the link. The importance for the benefit measure of the size of investment, the elasticity of substitution in production, and the transport sector model formulation is evaluated. The most paradoxical result is where the region not located at the improved link obtains the largest benefits from the improvement. Other results confirm that in a flexible economy benefits from an improvement are less than in a more rigid economy and that the transport sector may act as an intermediary of distortions in the economy. (A)

Language

  • English

Media Info

  • Features: References;
  • Pagination: 23 p.
  • Serial:
    • VTI SAERTRYCK
    • Issue Number: 299
    • Publisher: Swedish National Road and Transport Research Institute (VTI)
    • ISSN: 0347-6030

Subject/Index Terms

Filing Info

  • Accession Number: 00793814
  • Record Type: Publication
  • Source Agency: Swedish National Road and Transport Research Institute (VTI)
  • Files: ITRD, ATRI
  • Created Date: Jun 15 2000 12:00AM