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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 costs-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

Paper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2008011.

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Length: 45 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:ant:wpaper:2008011

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Postal: Prinsstraat 13, B-2000 Antwerpen
Web page: https://www.uantwerp.be/en/faculties/applied-economic-sciences/
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Keywords: Cost-benefit analysis; Transport investments; Marginal cost of funds;

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  1. Mayeres, Inge & Proost, Stef, 2001. "Marginal tax reform, externalities and income distribution," Journal of Public Economics, Elsevier, Elsevier, vol. 79(2), pages 343-363, February.
  2. Stéphane Gauthier & Guy Laroque, 2008. "Separability and Public Finance," Working Papers, Centre de Recherche en Economie et Statistique 2008-24, Centre de Recherche en Economie et Statistique.
  3. Liu, Liqun, 2003. "A marginal cost of funds approach to multi-period public project evaluation: implications for the social discount rate," Journal of Public Economics, Elsevier, Elsevier, vol. 87(7-8), pages 1707-1718, August.
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  7. Ballard, Charles L. & Medema, Steven G., 1993. "The marginal efficiency effects of taxes and subsidies in the presence of externalities : A computational general equilibrium approach," Journal of Public Economics, Elsevier, Elsevier, vol. 52(2), pages 199-216, September.
  8. Fosgerau, Mogens & Pilegaard, Ninette, 2007. "Cost-benefit rules for transport projects when labor supply is endogenous and taxes are distortionary," MPRA Paper 3902, University Library of Munich, Germany.
  9. Bruno De Borger & Stef Proost & Kurt Van Dender, 2003. "Congestion and tax competition in a parallel network," Energy, Transport and Environment Working Papers Series, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment ete0309, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
  10. De Borger, B. & Dunkerley, F. & Proost, S., 2007. "Strategic investment and pricing decisions in a congested transport corridor," Journal of Urban Economics, Elsevier, vol. 62(2), pages 294-316, September.
  11. Atkinson, Anthony B & Stern, N H, 1974. "Pigou, Taxation and Public Goods," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 41(1), pages 119-28, January.
  12. Mayeres, Inge & Proost, Stef, 1997. " Optimal Tax and Public Investment Rules for Congestion Type of Externalities," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 99(2), pages 261-79, June.
  13. Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup, 2006. "The marginal cost of public funds: Hours of work versus labor force participation," Journal of Public Economics, Elsevier, Elsevier, vol. 90(10-11), pages 1955-1973, November.
  14. Parry, Ian & Bento, Antonio, 1999. "Revenue Recycling and the Welfare Effects of Road Pricing," Discussion Papers, Resources For the Future dp-99-45, Resources For the Future.
  15. Kidokoro, Yukihiro, 2006. "Benefit estimation of transport projects--a representative consumer approach," Transportation Research Part B: Methodological, Elsevier, Elsevier, vol. 40(7), pages 521-542, August.
  16. Yoshitsugu Kanemoto & Koichi Mera, 1984. "General Equilibrium Analysis of the Benefits of Large Transportation Improvements," Working Papers, Queen's University, Department of Economics 567, Queen's University, Department of Economics.
  17. Sandmo, Agnar, 1998. "Redistribution and the marginal cost of public funds," Journal of Public Economics, Elsevier, Elsevier, vol. 70(3), pages 365-382, December.
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Cited by:
  1. 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, CTS - Centre for Transport Studies Stockholm (KTH and VTI) 2012:4, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
  2. Mogens Fosgerau & Kurt Van Dender, 2013. "Road pricing with complications," Transportation, Springer, Springer, vol. 40(3), pages 479-503, May.
  3. Nicole Adler & Chris Nash & Eric Pels, 2008. "High-Speed Rail & Air Transport Competition," Tinbergen Institute Discussion Papers 08-103/3, Tinbergen Institute.
  4. 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, Elsevier, vol. 61(C), pages 17-32.
  5. Stef PROOST & Fay DUNKERLEY & Saskia VAN DER LOO & Nicole ADLER & Johannes BRÖCKER & Artem KORZHENEVYCH, 2010. "Do the selected Trans European transport investments pass the Cost Benefit test?," Center for Economic Studies - Discussion papers, Katholieke Universiteit Leuven, Centrum voor Economische Studiën ces10.02, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  6. DE BORGER, Bruno & PROOST, Stef, 2010. "A political economy model of road pricing," Working Papers 2010014, University of Antwerp, Faculty of Applied Economics.
  7. 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.
  8. 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, Elsevier, vol. 54(C), pages 127-140.
  9. DE BORGER, Bruno & PROOST, Stef, 2013. "The political economy of pricing and capacity decisions for congestible local public goods in a federal state," Working Papers 2013020, University of Antwerp, Faculty of Applied Economics.
  10. 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, Elsevier, vol. 44(7), pages 812-833, August.
  11. Bröcker, Johannes & Korzhenevych, Artem & Schürmann, Carsten, 2010. "Assessing spatial equity and efficiency impacts of transport infrastructure projects," Transportation Research Part B: Methodological, Elsevier, Elsevier, vol. 44(7), pages 795-811, August.

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