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Cost Benefit Analysis of a Transport Improvement in the Case of Search Unemployment

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  • Ninette Pilegaard
  • Mogens Fosgerau

Abstract

We examine the implications of search unemployment for the evaluation of a transport investment in a conventional cost benefit analysis (CBA) assuming perfect competition. Lower transport costs induce search over a larger area and longer commuting distances. The expected duration of vacancies is reduced with ensuing benefits outweighing the loss to increased 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 substantial. © 2008 LSE and the University of Bath

Suggested Citation

  • Ninette Pilegaard & Mogens Fosgerau, 2008. "Cost Benefit Analysis of a Transport Improvement in the Case of Search Unemployment," Journal of Transport Economics and Policy, University of Bath, vol. 42(1), pages 23-42, January.
    • Handle: RePEc:tpe:jtecpo:v:42:y:2008:i:1:p:23-42
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    Cited by:

    1. 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).
    2. Hirte, Georg & Tscharaktschiew, Stefan, 2018. "The impact of anti-congestion policies and the role of labor-supply margins," CEPIE Working Papers 04/18, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    3. Raux, Charles & Souche, Stéphanie & Pons, Damien, 2012. "The efficiency of congestion charging: Some lessons from cost–benefit analyses," Research in Transportation Economics, Elsevier, vol. 36(1), pages 85-92.
    4. Börjesson, Maria & Kristoffersson, Ida, 2014. "Assessing the welfare effects of congestion charges in a real world setting," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 339-355.
    5. 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).
    6. Mogens Fosgerau & Kurt Van Dender, 2013. "Road pricing with complications," Transportation, Springer, vol. 40(3), pages 479-503, May.
    7. Bert van Wee & Piet Rietveld, 2013. "CBA: ex ante evaluation of mega-projects," Chapters, in: Hugo Priemus & Bert van Wee (ed.), International Handbook on Mega-Projects, chapter 12, pages 269-290, Edward Elgar Publishing.
    8. repec:mul:je8794:doi:10.1429/34355:y:2011:i:1:p:125 is not listed on IDEAS
    9. Moez Kilani & Ngagne Diop & Daniel De Wolf, 2022. "A Multimodal Transport Model to Evaluate Transport Policies in the North of France," Sustainability, MDPI, vol. 14(3), pages 1-16, January.
    10. Daniel G. Chatman & Robert B. Noland, 2014. "Transit Service, Physical Agglomeration and Productivity in US Metropolitan Areas," Urban Studies, Urban Studies Journal Limited, vol. 51(5), pages 917-937, April.
    11. Laird, James J. & Mackie, Peter J., 2014. "Wider economic benefits of transport schemes in remote rural areas," Research in Transportation Economics, Elsevier, vol. 47(C), pages 92-102.
    12. 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.
    13. De Borger, Bruno & Fosgerau, Mogens, 2008. "The trade-off between money and travel time: A test of the theory of reference-dependent preferences," Journal of Urban Economics, Elsevier, vol. 64(1), pages 101-115, July.
    14. Hirte, Georg & Tscharaktschiew, Stefan, 2020. "The role of labor-supply margins in shaping optimal transport taxes," Economics of Transportation, Elsevier, vol. 22(C).
    15. Piotr Rosik & Julia Wójcik, 2022. "Transport Infrastructure and Regional Development: A Survey of Literature on Wider Economic and Spatial Impacts," Sustainability, MDPI, vol. 15(1), pages 1-19, December.
    16. Vandyck, Toon & Rutherford, Thomas F., 2018. "Regional labor markets, commuting, and the economic impact of road pricing," Regional Science and Urban Economics, Elsevier, vol. 73(C), pages 217-236.
    17. Robson, Edward N. & Wijayaratna, Kasun P. & Dixit, Vinayak V., 2018. "A review of computable general equilibrium models for transport and their applications in appraisal," Transportation Research Part A: Policy and Practice, Elsevier, vol. 116(C), pages 31-53.
    18. Avetisyan, Misak & Heatwole, Nathaniel & Rose, Adam & Roberts, Bryan, 2015. "Competitiveness and macroeconomic impacts of reduced wait times at U.S. land freight border crossings," Transportation Research Part A: Policy and Practice, Elsevier, vol. 78(C), pages 84-101.
    19. Jonas Westin, 2011. "Labor Market Effects of Road Pricing in a Population with Continuously Distributed Value of Time," ERSA conference papers ersa10p1458, European Regional Science Association.
    20. 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).
    21. 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.
    22. Börjesson, Maria & Kristoffersson, Ida, 2012. "Estimating welfare effects of congestion charges in real world settings," Working papers in Transport Economics 2012:13, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    23. Zhu, Xueqin & Van Ommeren, Jos & Rietveld, Piet, 2009. "Indirect benefits of infrastructure improvement in the case of an imperfect labor market," Transportation Research Part B: Methodological, Elsevier, vol. 43(1), pages 57-72, January.
    24. Avetisyan, Misak & Heatwole, Nathaniel & Rose, Adam & Roberts, Bryan, 2014. "Competitiveness and Macroeconomic Impacts of Reduced Wait Times at U.S. Land Freight Border Crossings," Conference papers 332435, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

    More about this item

    JEL classification:

    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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