Cost benefit-analysis of a transport improvement in the case of search unemployment
AbstractWe examine the implications of search unemployment for the evaluation of a transport in-vestment in a conventional cost benefit analysis (CBA) assuming perfect competition. Lower transport costs induces search over a larger area and longer commuting distances. The ex-pected duration of vacancies is reduced with ensuing benefits outweighing the loss to in-creased transport. The search imperfection drives a wedge between the marginal product of labour and the wage, such that the final benefits of a transport improvement exceed those of a conventional CBA. Using a simulation model we find these additional benefits may be sub-stantial.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 10037.
Date of creation: 2008
Date of revision:
Cost-benefit; transport; search unemployment; welfare;
Other versions of this item:
- Ninette Pilegaard & Mogens Fosgerau, 2008. "Cost Benefit Analysis of a Transport Improvement in the Case of Search Unemployment," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 42(1), pages 23-42, January.
- R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-21 (All new papers)
- NEP-GEO-2008-08-21 (Economic Geography)
- NEP-LAB-2008-08-21 (Labour Economics)
- NEP-URE-2008-08-21 (Urban & Real Estate Economics)
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