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Incorporating Agglomeration Economies In Cost-Benefit Analysis Of Transport Projects

  • Dani Shefer

    ()

  • Haim Aviram

    ()

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    Economic evaluation of transport projects relies primarily on the impact of the project on road users. Economic benefits are calculated from the reduction in the aggregate value of time saved by the transport users as well as saving on vehicle operation costs. Most often the analysis assumes fix demand. Major mass transit, like the new Light Rail Transit (LRT), currently being proposed for the Tel-Aviv Metropolitan Area in Israel, is anticipated to generate substantial new traffic. This new traffic generation will most likely enhance the agglomeration forces at work in major urban concentration. Agglomeration economies could shift upward the production function of the metropolitan area, thus generating substantial additional benefits accrued to the transport project. In this paper we present the methodology used in the estimation of the benefits derived from agglomeration economies induced by the proposed new Light Rail Transit in the Tel-Aviv Metropolitan Area. We estimate the increase in the number of employees in the CBD due to the proposed LRT and their potential contribution to the total annual production of the CBD. Agglomeration economies could add a significant amount of additional benefit to the transport project. The extend of these benefits, in our case study, increased the benefit-cost ratio from 1.15 to 1.40.

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    File URL: http://www-sre.wu-wien.ac.at/ersa/ersaconfs/ersa05/papers/133.pdf
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    Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa05p133.

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    Date of creation: Aug 2005
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    Handle: RePEc:wiw:wiwrsa:ersa05p133
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    1. Gerald Carlino & Satyajit Chatterjee & Robert Hunt, 2005. "Matching and learning in cities: urban density and the rate of invention," Working Papers 04-16, Federal Reserve Bank of Philadelphia.
    2. Gilles Duranton & Diego Puga, 2000. "Nursery cities: urban diversity, process innovation and the life-cycle of products," LSE Research Online Documents on Economics 20204, London School of Economics and Political Science, LSE Library.
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    4. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
    5. Antonio Ciccone & Robert E. Hall, 1995. "Productivity and the density of economic activity," Economics Working Papers 120, Department of Economics and Business, Universitat Pompeu Fabra.
    6. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers 14-92, Tel Aviv.
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