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

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  • Daniel Graham

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  • Kurt Dender

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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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Suggested Citation

  • 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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    References listed on IDEAS

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    Citations

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    Cited by:

    1. 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.
    2. Maré, David C. & Graham, Daniel J., 2013. "Agglomeration elasticities and firm heterogeneity," Journal of Urban Economics, Elsevier, vol. 75(C), pages 44-56.
    3. 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).
    4. 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.
    5. Eliasson, Jonas & Fosgerau, Mogens, 2017. "Cost-benefit analysis of transport improvements in the presence of spillovers, matching and an income tax," Working papers in Transport Economics 2017:3, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    6. Laird, James J. & Venables, Anthony J., 2017. "Transport investment and economic performance: A framework for project appraisal," Transport Policy, Elsevier, vol. 56(C), pages 1-11.
    7. 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).
    8. 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.

    More about this item

    Keywords

    Agglomeration; Transport; Causality; Heterogeneity; Confounding;

    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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