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Road investments and the trade-off between private and public funding

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  • Welde, Morten
  • Bråthen, Svein
  • Rekdal, Jens
  • Zhang, Wei

Abstract

This paper assesses the impacts tolls have on economic profitability. We show that Norway has a long and diversified tradition for financing road construction by means of tolls. 20–30 per cent of the total funds available for road funding consist of toll revenues. Despite this extensive use of tolls, there is a weak tradition for detailed studies of the economic effects from tolls. This implies that the net benefit of the projects may have been overestimated. In order to explore this in more detail, we have studied four tolled road projects. The paper provides an empirical assessment, by means of a transport model, of how to determine optimal funding in order to maximise net present value, given a set of financial and/or political constraints. The main finding of the paper is that tolling can have a significant impact on economic profitability and that these effects should be examined carefully as part of the basis for the investment decision.

Suggested Citation

  • Welde, Morten & Bråthen, Svein & Rekdal, Jens & Zhang, Wei, 2020. "Road investments and the trade-off between private and public funding," Research in Transportation Economics, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:retrec:v:82:y:2020:i:c:s0739885920300731
    DOI: 10.1016/j.retrec.2020.100875
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    References listed on IDEAS

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    1. Erik Amdal & Gunnar Bårdsen & Kåre Johansen & Morten Welde, 2007. "Operating costs in Norwegian toll companies: a panel data analysis," Transportation, Springer, vol. 34(6), pages 681-695, November.
    2. Jonas Eliasson & Maria Börjesson & James Odeck & Morten Welde, 2015. "Does Benefit-Cost Efficiency Influence Transport Investment Decisions?," Journal of Transport Economics and Policy, University of Bath, vol. 49(3), pages 377-396, July.
    3. Anthony J. Venables, 2007. "Evaluating Urban Transport Improvements: Cost-Benefit Analysis in the Presence of Agglomeration and Income Taxation," Journal of Transport Economics and Policy, University of Bath, vol. 41(2), pages 173-188, May.
    4. Robert Bain, 2009. "Error and optimism bias in toll road traffic forecasts," Transportation, Springer, vol. 36(5), pages 469-482, September.
    5. Charles L. Ballard & Don Fullerton, 1992. "Distortionary Taxes and the Provision of Public Goods," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 117-131, Summer.
    6. Odeck, James & Bråthen, Svein, 2008. "Travel demand elasticities and users attitudes: A case study of Norwegian toll projects," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(1), pages 77-94, January.
    7. Christine Brown, 2005. "Financing Transport Infrastructure: For Whom the Road Tolls," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 38(4), pages 431-438, December.
    8. Odeck, James & Welde, Morten, 2017. "The accuracy of toll road traffic forecasts: An econometric evaluation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 101(C), pages 73-85.
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    Cited by:

    1. Welde, Morten & Tveter, Eivind, 2022. "The wider local impacts of new roads: A case study of 10 projects," Transport Policy, Elsevier, vol. 115(C), pages 164-180.

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    More about this item

    Keywords

    Tolls; Road tolls; Toll financing; Appraisal; Cost benefit analysis; Economic profitability;
    All these keywords.

    JEL classification:

    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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