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Evaluation tool for wider economic effects of railway investments ? making CGE results accessible

Author

Listed:
  • Jouko Kinnunen

  • Heikki Metsäranta
  • Hannu Törmä
  • Seppo Laakso
  • Urszula Zimoch

Abstract

Transport sector has a long tradition of using the principles of practical cost benefit analysis (CBA) in project appraisal that analyses the primary impacts of transport investments. The standard transport project assessment is necessary but not sufficient for the estimation of the wider economic impacts, which are in increasing demand among decision makers. Computable General Equilibrium models (CGE) have been proven to be powerful tools in the assessment of economic impacts of infrastructure investments. In this project, GEMPACK-based dynamic regional CGE-models (RegFinDyn and RegSweDyn) have been used in the assessment of rail investments in Finland and in Sweden. The models are fairly standard versions of the Australian TERM model, with some exceptions regarding labor market, migration, demography and agglomeration economies. The use of these models is, however, rather expensive and requires specific skills, software and knowledge. This project tackled these contradicting needs for a complex CGE-modelling and the desired easiness and flexibility of the analysis: A freely available spreadsheet tool was developed with a streamlined interface that uses a large number of previously made CGE-model simulations as basis for the assessment. The developed twin tools were named WebRailSwe and WebRailFin. The tools are made for a quantitative, first approximation of the wider economic impacts of large rail investments in the national areas of Sweden or Finland. The wider economic impacts calculated by this tool are supplementary to the results of a standard project assessment (CBA). The tools use generalised results of RegSweDyn and RegFinDyn CGE-modelling, which could be termed as ?model of a model? approach. CGE model results are used as observations to estimate regression equations where investment shock variables are used to explain the observed deviations from the base run. The four economic indicators calculated by the tools are real GDP, real household consumption, employment and population. It has been proven that it is possible to have an accessible tool that is relatively simple to use but gives results that are based on comprehensive CGE-modelling. This can be considered a promising start for a wider consideration of advanced modelling of economic impacts in the transport sector. However, the results of this project, WebRailSwe and WebRailFin, are only applicable to railway investments, and the results are calculated and presented on a spatial resolution that is rather coarse. Further work could be done to develop similar tools for road investments and other forms of transport improvements, and to increase the spatial resolution of the tools.

Suggested Citation

  • Jouko Kinnunen & Heikki Metsäranta & Hannu Törmä & Seppo Laakso & Urszula Zimoch, 2015. "Evaluation tool for wider economic effects of railway investments ? making CGE results accessible," ERSA conference papers ersa15p16, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa15p16
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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