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Estimating the agglomeration benefits of transport investments: some tests for stability

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  • Daniel Graham
  • Kurt Dender

Abstract

The case for including agglomeration benefits within transport appraisal rests on an assumed causality between access to economic mass and productivity. Such causality is difficult to establish empirically because estimates may be subject to sources of bias from endogeneity and confounding. They may also be sensitive to the range of sample variance in agglomeration being used. The purpose of this paper is to demonstrate some of the key difficulties that the researcher faces in estimating agglomeration economies and to show how these can affect the calculation of agglomeration benefits for the appraisal of transport projects. The results show a high degree of sensitivity to treatment for unobserved heterogeneity and to differences in the sample variance of agglomeration. A key conclusion is that we are unable to distinguish agglomeration effects from other potential explanations for productivity increases, most notably functional heterogeneity. Consequently, the agglomeration effects of transport investments cannot be interpreted causally.
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  • Daniel Graham & Kurt Dender, 2011. "Estimating the agglomeration benefits of transport investments: some tests for stability," Transportation, Springer, vol. 38(3), pages 409-426, May.
    • Handle: RePEc:kap:transp:v:38:y:2011:i:3:p:409-426
    DOI: 10.1007/s11116-010-9310-0
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    3. Börjesson, Maria & Jonsson, R. Daniel & Lundberg, Mattias, 2014. "An ex-post CBA for the Stockholm Metro," Transportation Research Part A: Policy and Practice, Elsevier, vol. 70(C), pages 135-148.
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    5. Börjesson, Maria & Isacsson, Gunnar & Andersson, Matts & Anderstig, Christer, 2018. "Agglomeration, productivity and the role of transport system improvements," Working papers in Transport Economics 2018:16, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    6. Rokicki, Bartlomiej & Stępniak, Marcin, 2018. "Major transport infrastructure investment and regional economic development – An accessibility-based approach," Journal of Transport Geography, Elsevier, vol. 72(C), pages 36-49.
    7. Patricia C Melo & Daniel J Graham & David Levinson & Sarah Aarabi, 2017. "Agglomeration, accessibility and productivity: Evidence for large metropolitan areas in the US," Urban Studies, Urban Studies Journal Limited, vol. 54(1), pages 179-195, January.
    8. Lee, Jae Kwang, 2021. "Transport infrastructure investment, accessibility change and firm productivity: Evidence from the Seoul region," Journal of Transport Geography, Elsevier, vol. 96(C).
    9. Eliasson, Jonas & Fosgerau, Mogens, 2019. "Cost-benefit analysis of transport improvements in the presence of spillovers, matching and an income tax," Economics of Transportation, Elsevier, vol. 18(C), pages 1-9.
    10. Maré, David C. & Graham, Daniel J., 2013. "Agglomeration elasticities and firm heterogeneity," Journal of Urban Economics, Elsevier, vol. 75(C), pages 44-56.
    11. Wanle Wang & Ming Zhong & John Douglas Hunt, 2019. "Analysis of the Wider Economic Impact of a Transport Infrastructure Project Using an Integrated Land Use Transport Model," Sustainability, MDPI, vol. 11(2), pages 1-17, January.
    12. Euijune Kim & Min Jiang & Byula Kim, 2022. "Analyzing impacts of Vietnam’s North–South highway on creation of regional cluster," Asia-Pacific Journal of Regional Science, Springer, vol. 6(2), pages 617-633, June.
    13. Li, Jianling & Whitaker, Elizabeth, 2018. "The impact of governmental highway investments on local economic outcome in the post-highway era," Transportation Research Part A: Policy and Practice, Elsevier, vol. 113(C), pages 410-420.
    14. Gong, Zhenwei & Zhang, Fangni & Liu, Wei & Graham, Daniel J., 2023. "On the effects of airport capacity expansion under responsive airlines and elastic passenger demand," Transportation Research Part B: Methodological, Elsevier, vol. 170(C), pages 48-76.
    15. 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).
    16. Andersson, Matts & Dehlin, Fredrik & Jörgensen, Peter & Pädam, Sirje, 2015. "Wider economic impacts of accessibility: a literature survey," Working papers in Transport Economics 2015:14, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    17. Johannes Bröcker, 2013. "Wider Economic Benefits from Communication-Cost Reductions: An Endogenous Growth Approach," Environment and Planning B, , vol. 40(6), pages 971-986, December.
    18. Graham, Daniel J. & Gibbons, Stephen, 2019. "Quantifying Wider Economic Impacts of agglomeration for transport appraisal: Existing evidence and future directions," Economics of Transportation, Elsevier, vol. 19(C), pages 1-1.
    19. Melo, Patricia C. & Graham, Daniel J. & Brage-Ardao, Ruben, 2013. "The productivity of transport infrastructure investment: A meta-analysis of empirical evidence," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 695-706.
    20. Ren, Yi & Tian, Yuan & Xiao, Xue, 2022. "Spatial effects of transportation infrastructure on the development of urban agglomeration integration: Evidence from the Yangtze River Economic Belt," Journal of Transport Geography, Elsevier, vol. 104(C).
    21. Yu, Haowei & Zhou, You, 2021. "Highway Spending and Induced Vehicle Emissions: Evidence from the US states," Resource and Energy Economics, Elsevier, vol. 65(C).
    22. Ben Dachis, 2013. "Cars, Congestion and Costs: A New Approach to Evaluating Government Infrastructure Investment," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 385, July.

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    More about this item

    Keywords

    Agglomeration; Transport; Causality; Heterogeneity; Confounding;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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