Efficiency of European Funds in the Accession Countries: The Case of Transport Infrastructure Investments in Latvia

ABSTRACT

A transport initiative, like any kind of public action, has an impact on the monetary cost, time cost, efficiency and comfort of the transportation of goods and people, in particular transport infrastructure investments. All such initiatives are subject to cost benefit analyses at the national and EU level to know whether the present value of total net benefits including environmental impacts exceeds their cost. However, several important policy issues remain unresolved in standard evaluation procedures. One issue is whether the so-called direct measurement of user benefit, which consists of quantifying changes in surplus of the users of the transport system, captures all welfare generated in the economy. Another issue is how the gains (or possibly losses) of a transport initiative are distributed among regions. The aim of this article is to perform a systematic and quantitative analysis of the socio-economic and spatial impacts of alternative transport investments by carrying out scenario simulations in order to improve the understanding of the impact of transportation policies on the short- and long-term spatial development in Latvia. The general result from the scenario simulations is that rail projects seem to be more effective in terms of promoting regional economic activity than road projects.