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Cost-benefit analysis of transport investments in distorted economies

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  • Calthrop, Edward
  • De Borger, Bruno
  • Proost, Stef

Abstract

This paper deals with cost-benefit analysis of investment in transport infrastructure. Its contribution is twofold. Firstly, we develop a general equilibrium model to explore the impact of a small budgetary-neutral investment in transport infrastructure in a second-best setting, where other markets in the economy are distorted by taxes or external costs. The model incorporates different transport modes that are used both for intermediate inputs (freight) and for final consumption (passenger travel). An intuitive operational expression for the net economic benefit of an investment is derived that depends on the way the investment is financed. This expression generalizes recent findings in the literature. Secondly, we illustrate the results numerically using a small example. Our findings show that both the specific financing instrument used and the labour market consequences may have large implications for the net benefits of transport investments. Significant errors may be made in limiting cost-benefit analysis to transport markets only.

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Bibliographic Info

Article provided by Elsevier in its journal Transportation Research Part B: Methodological.

Volume (Year): 44 (2010)
Issue (Month): 7 (August)
Pages: 850-869

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Handle: RePEc:eee:transb:v:44:y:2010:i:7:p:850-869

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Keywords: Cost-benefit analysis Transport investments Marginal cost of funds;

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References

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  1. Yoshitsugu Kanemoto & Koichi Mera, 1984. "General Equilibrium Analysis of the Benefits of Large Transportation Improvements," Working Papers 567, Queen's University, Department of Economics.
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  7. Mayeres, Inge & Proost, Stef, 1997. " Optimal Tax and Public Investment Rules for Congestion Type of Externalities," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 261-79, June.
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  17. H. C. W. L. Williams & D. Van Vliet & C. Parathira & K. S. Kim, 2001. "Highway Investment Benefits under Alternative Pricing Regimes," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 35(2), pages 257-284, May.
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Citations

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Cited by:
  1. Stef Proost & Fay Dunkerley & Saskia Loo & Nicole Adler & Johannes Bröcker & Artem Korzhenevych, 2014. "Do the selected Trans European transport investments pass the cost benefit test?," Transportation, Springer, vol. 41(1), pages 107-132, January.
  2. Bröcker, Johannes & Korzhenevych, Artem & Schürmann, Carsten, 2010. "Assessing spatial equity and efficiency impacts of transport infrastructure projects," Transportation Research Part B: Methodological, Elsevier, vol. 44(7), pages 795-811, August.
  3. Bruno DE BORGER & Stefan PROOST, 2013. "The political economy of pricing and capacity decisions for congestible local public goods in a federal state," Center for Economic Studies - Discussion papers ces13.16, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  4. Adler, Nicole & Pels, Eric & Nash, Chris, 2010. "High-speed rail and air transport competition: Game engineering as tool for cost-benefit analysis," Transportation Research Part B: Methodological, Elsevier, vol. 44(7), pages 812-833, August.
  5. Mogens Fosgerau & Kurt van Dender, 2010. "Road Pricing with Complication," OECD/ITF Joint Transport Research Centre Discussion Papers 2010/2, OECD Publishing.
  6. De Borger, Bruno & Proost, Stef, 2012. "A political economy model of road pricing," Journal of Urban Economics, Elsevier, vol. 71(1), pages 79-92.
  7. Anderstig, Christer & Berglund, Svante & Eliasson, Jonas & Andersson, Matts & Pyddoke, Roger, 2012. "Congestion charges and labour market imperfections: “Wider economic benefits” or “losses”?," Working papers in Transport Economics 2012:4, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
  8. Pita, João P. & Adler, Nicole & Antunes, António P., 2014. "Socially-oriented flight scheduling and fleet assignment model with an application to Norway," Transportation Research Part B: Methodological, Elsevier, vol. 61(C), pages 17-32.
  9. Gershenson, Seth, 2013. "The causal effect of commute time on labor supply: Evidence from a natural experiment involving substitute teachers," Transportation Research Part A: Policy and Practice, Elsevier, vol. 54(C), pages 127-140.
  10. Hensher, David A. & Li, Zheng, 2013. "Referendum voting in road pricing reform: A review of the evidence," Transport Policy, Elsevier, vol. 25(C), pages 186-197.
  11. Nicole Adler & Chris Nash & Eric Pels, 2008. "High-Speed Rail & Air Transport Competition," Tinbergen Institute Discussion Papers 08-103/3, Tinbergen Institute.

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