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.     

Port investments on coastal and marine disasters prevention: Economic modeling and implications

Located along shorelines, seaports are highly vulnerable to coastal and marine natural disasters largely due to climate change. Damage caused by disasters can be prevented or alleviated if sufficient investments are made in a timely manner. However, despite a wide range of investment options and well-developed engineering expertise, port investment on disaster prevention remains a challenging task involving great complexities. This paper develops an integrated economic model for the analysis of disaster-prevention investments at a “landlord” port. It simultaneously considers the uncertainty of disaster occurrence and associated return of prevention investments, the information accumulation and related investment timing, and the benefit spillovers of investment among stakeholders. Our analysis shows that the timing of port investments depends on the probability of disasters. Immediate investment is optimal for disasters with very high probability, while investment should be postponed if such a probability is very low. Optimal timing for cases of intermediate probability cannot be determined analytically, as it is influenced by other factors such as discount rate, information accumulation and efficiency of investments. Positive spillovers between a port and its tenants lead to under-investment, which can be corrected by coordination between stakeholders. However, since there are risks of “overinvestment” (the marginal benefits of investments are zero ex post if there is no disaster), regulatory intervention is not always optimal when the regulator does not have a good understanding of disaster probability distribution. Therefore, scientific research would bring significant economic and strategic value to policy, planning and investment decisions.     

Total cost analysis: An alternative to benefit-cost analysis in evaluating transportation alternatives

This paper explains the theory in support of total cost analysis (TCA) to compare transportation system alternatives. The full costs of each alternative are first aggregated, including travel time costs and monetizable environmental and social costs. Many costs which are considered on the benefits side of the equation in benefit-cost analysis (BCA) as "cost savings" are brought over to the costs side. Total cost differences among alternatives are then traded off against their estimated non-monetized benefits or impacts, just as a consumer trades off product quality against cost before deciding which product he or she will buy. One advantage of TCA over traditional BCA is that the concept of "total cost" is more easily understood by the public and by political decision-makers than BCA concepts such as "net present worth", "benefit-cost ratio" and "internal rate of return". A second advantage is that there is no suggestion that all "benefits" have been considered; decision-makers are free to use their own value judgements to trade off total cost against non-monetizable social, environmental and economic impacts, just as they trade off quality and convenience against cost when purchasing goods and services in their roles as consumers. The TCA approach is demonstrated in this paper through a case study of two systemwide alternatives for the Baltimore, MD urban area.     

AN APPROACH TO THE ECONOMIC APPRAISAL OF AVCS MAGLEV

The purpose of an economic appraisal of a transportation project is to help select an efficient transportation investment plan. Here, efficiency means achieving the best transportation service from a given investment and the generation of net benefits at least as great as the costs of the investment. In this article, three future transportation investment alternatives in the USA are compared using the benefit-cost ratio method to illustrate the economic desirability of the AVCS Maglev alternative – an advanced vehicle control system based on magnetic levitation and propulsion. For the completeness of the economic appraisal and the provision of a guide to performing non-user benefit analysis for this promising ITS technology, the socioeconomic effects of implementing AVCS Maglev in the USA are evaluated based on the US National Development Model (NDM).     

Closed form models to assess railroad technology investments

ABSTRACT

Class I railroads in North America collectively invested USUS$11.2 billion to comply with a U.S. federal mandate to deploy positive train control as a form of train protection system. This amount dwarfs the potential savings from accidents the technology could prevent. Therefore, railroads must seek additional benefits. This research contributes simple closed-form models to inform strategies that can leverage the technology deployment by estimating the annual additional net benefits, internal rate of return, and benefit-cost ratio needed for a desired payback period.     

A hybrid model of fuzzy and AHP for handling public assessments on transportation projects

Having an effective public participation in transportation planning and project development processes has been a major concern for developed countries. In the United States, for instance, all state Departments of Transportation are subject to the Transportation Equity Act (TEA-21) that formally requires public involvement in transportation planning. Since transportation planning involves public resources and values, judgments by the public should play a key role in determining final decisions. Therefore, all these agencies are required not only to disseminate information to the public, but also to solicit and consider public opinion in forming transportation policy. This work presents a decision support model, with public involvement and public oversight, to help policy makers select appropriate transportation projects for implementation. Since focus groups will face multiple objectives and inexact information in the process, a hybrid model of fuzzy logic and analytical hierarchy process (AHP) is proposed. A set of ‘if–then’ rules based on Weber’s psycho-physical law of 1834 is presented to reason from fuzzy numbers to capture essential subjective preferences, pairwise, among the alternatives. The AHP is then incorporated to estimate preference allotments among alternatives. An example application of the suggested method is provided seeking public approval of an appropriate public bus transportation system choosing between one run by municipal authorities and one run by private agencies to show how this procedure works.

A methodology to estimate the revenue anticipated from State-level alternative financing approaches in the US

A major issue that State Departments of Transportation (DOTs) in the US face relates to financing future transportation investments. Questions of interest to State DOT officials relate to the suitability and revenue potential of alternative financing approaches. This paper presents a methodology to estimate the potential levels of revenue associated with the use of selected combinations of financing approaches and to assess the adequacy of these revenues vis-a-vis various levels of investments being considered by decision-makers. The methodology is designed to accommodate a wide array of inputs such as major policy objectives and initial assumptions that may vary significantly from State to State in order to provide a greater flexibility of implementation. The application of this methodology is demonstrated with an illustrative example for Massachusetts. This paper should be of interest to State DOTs seeking an acceptable combination of financing approaches to support future transportation investments.     

Methods to reduce dimensionality and identify candidate solutions in multi-objective signal timing problems

Adjusting traffic signal timings is a practical way for agencies to manage urban traffic without the need for significant infrastructure investments. Signal timings are generally selected to minimize the total control delay vehicles experience at an intersection, particularly when the intersection is isolated or undersaturated. However, in practice, there are many other potential objectives that might be considered in signal timing design, including: total passenger delay, pedestrian delays, delay inequity among competing movements, total number of stopping maneuvers, among others. These objectives do not tend to share the same relationships with signal timing plans and some of these objectives may be in direct conflict. The research proposes the use of a new multi-objective optimization (MOO) visualization technique—the mosaic plot—to easily quantify and identify significant tradeoffs between competing objectives using the set of Pareto optimal solutions that are normally provided by MOO algorithms. Using this tool, methods are also proposed to identify and remove potentially redundant or unnecessary objectives that do not have any significant tradeoffs with others in an effort to reduce problem dimensionality. Since MOO procedures will still be needed if more than one objective remains and MOO algorithms generally provide a set of candidate solutions instead of a single final solution, two methods are proposed to rank the set of Pareto optimal solutions based on how well they balance between the competing objectives to provide a final recommendation. These methods rely on converting the objectives to dimensionless values based on the optimal value for each specific objectives, which allows for direct comparison between and weighting of each. The proposed methods are demonstrated using a simple numerical example of an undersaturated intersection where all objectives can be analytically obtained. However, they can be readily applied to other signal timing problems where objectives can be obtained using simulation outputs to help identify the signal timing plan that provides the most reasonable tradeoff between competing objectives.     

Substance precedes methodology: on cost–benefit analysis and equity

While distributive aspects have been a topic of discussion in relation to cost–benefit analysis (CBA), little systematic thought has been given in the CBA literature to the focus of such an equity analysis in evaluating transport projects. The goal of the paper is to provide an overview of the various directions an equity analysis, carried out within the context of a social cost–benefit analysis, could take. The paper starts from the widely-shared definition of distributive justice: the morally proper distribution of goods and bads over members of society. Following this definition, carrying out an equity analysis requires that decisions are made about: (1) the benefits and costs that are distributed through a transport project; (2) the members of society between whom benefits and costs are distributed; and (3) the distributive principle that determines whether a particular distribution is fair. Much of the discussions about cost–benefit analysis and equity do not address these questions in any systematic way. The paper aims to provide a framework. Three sets of benefits and costs are identified as a possible focus of an equity analysis: (1) net benefits; (2) mobility-enhancing benefits; and (3) individual benefits and costs. For each set, a discussion follows regarding the way in which members of societies could be divided into meaningful groups, as well as the possible yardstick for judging whether a certain distribution is fair. While the paper acknowledges that the choice between the three sets is ultimately a political decision, it ends with a set of arguments that suggest that the equity analysis of transport projects should focus first and foremost on the mobility-enhancing benefits generated by such projects.     

Empirical analysis of transportation investment and economic development at state, county and municipality levels

Numerous studies have found positive correlation between transportation infrastructure investment and economic development. Basically these studies use a conventional production function model augmented by a public capital input, mainly highways, rail and other transportation facilities. While the range of the measured economic growth effects varies widely among studies, the positive elasticity between transportation investment and economic development is now commonly accepted. Still a major puzzling issue is that the magnitude of the measured effect seems to decline significantly as the econometric model is further refined, mainly with regard to space and time lags. That is, the use of national or state data produces elasticity results, which are much larger than when using county or municipality data. Similarly, when we introduce into the econometric model a lag between the times when the transportation investments are made and when the economic benefits transpire, the measured elasticities decline with the size of the lag. Thus, the main objective of this paper is to investigate these issues analytically and empirically and provide a plausible explanation. We do so by using alternative econometric models, applying them to a database, which is composed of longitudinal state, county and municipality observations from 1990 to 2000. The key result is that transportation investments produce strong spillover effects relative to space and time. Unless these factors are properly accounted for many reported empirical results are likely to be overly biased, with important policy implications.     

Benefit-cost analysis for labor intensive transportation systems

Labor-intensive systems such as bikeways and pedestrian ways suffer in transportation planning in part because traditional benefit-cost analysis focuses on narrow, private transportation savings (e.g., reducing vehicle and time costs).Planners need benefit-cost frameworks which capture the community-wide effects of such innovative transportation systems — reduction in air pollution, less congestion, and increases in exercise and outdoor recreation. This study discusses practical methods for planners to include such categories in their analyses and applies these methods to two case studies. The analysis yields benefit-cost ratios which are much higher than those found in most public projects — suggesting negative returns to marginal automobiles in congested areas such as university campuses. The paper concludes with some suggested bikeway planning guidelines that emerge from expanded benefit-cost analysis.     

Cost-effectiveness of reductions in greenhouse gas emissions from High-Speed Rail and urban transportation projects in California

A rising trend in state and federal transportation finance is to invest capital dollars into projects which reduce greenhouse gas (GHG) emissions. However, a key metric for comparing projects, the cost-effectiveness of GHG emissions reductions, is highly dependent on the cost-benefit methodology employed in the analysis. Our analysis comparing California High-Speed Rail and three urban transportation projects shows how four different accounting framings bring wide variations in cost per metric tonne of GHG emissions reduced. In our analysis, life-cycle GHG emissions are joined with full cost accounting to better understand the benefits of cap-and-trade investments. Considering only public subsidy for capital, none of the projects appear to be a cost-effective means to reduce GHG emissions (i.e., relative to the current price of GHG emissions in California’s cap-and-trade program at $12.21 per tonne). However, after adjusting for the change in private costs users incur when switching from the counterfactual mode (automobile or aircraft) to the mode enabled by the project, all investments appear to reduce GHG emissions at a net savings to the public. Policy and decision-makers who consider only the capital cost of new transportation projects can be expected to incorrectly assess alternatives and indirect benefits (i.e., how travelers adapt to the new mass transit alternative) should be included in decision-making processes.     

Appraising large-scale investments in a metropolitan transportation system

A package of large-scale investments in the transportation infrastructure in the Stockholm metropolitan region is currently being proposed. It contains new investments in the railway and subway systems as well as new links in the road system. This paper deals with the issue of appraising this kind of investment program. One major problem is the lack of a unique standard method, and it is argued that several tools should be used in a practical evaluation of large-scale investments in the transportation system.Four different approaches are presented and related to each other. First, one study uses a network-based mode-split/assignment model with a fixed trip matrix. The second study is complementary, as its aim is to also trace the impacts on the spatial distribution of population and jobs by applying an integrated transportation and land use model. Third, the long-run effects of the investments on regional economic growth are discussed within the framework of regional production functions. Fourth, an alternative approach is used, in which benefits from the investments are assessed through their estimated influence on aggregate land values.Abbreviations RA Reference Alternative - IP Investment Proposal - IMREL Integrated Model of Residential and Employment Location - RPFM Regional Production Function Model An earlier version of this paper was presented at the 31th European Congress of the Regional Science Association, Lisbon, August 1991.     

A time‐staged multi‐objective network‐design model

A multi‐objective, time‐staged network‐design problem is formulated. Through transformation, the problem is decomposed into a set of single‐period, single‐objective problems. Lexicographic ordering is instrumental in effecting this transformation; it also allows a backward‐recursion algorithm to be applied using strong pruning criteria. Furthermore, monotonicity properties enable us to solve the problem using the familiar tree‐search algorithms. The solution method has several desirable properties — as shown by an example and a case study of Tripoli Province, Libya. First, the algorithm ensures continuity of project implementation over the multi time‐periods and provides optimality in later computational stages irrespective of the decision at an interim stage. Second, the algorithm tends to provide accessibility to unconnected regions in the study area at low user‐cost without employing weights to the two objective functions of accessibility and user‐cost efficiency. Such a property is deemed advantageous for suggesting transportation investments based purely on purchasing the greatest benefit for each dollar, with political neutrality strictly maintained.     

Exploring active transportation investments and associated benefits for municipal budgets: a scoping review

Municipalities play an important role in the planning and development of communities that support active transportation (AT), which refers to human-powered modes of travel, such as walking and cycling. Municipal-level stakeholders involved in land-use and transportation infrastructure planning consider multiple social, environmental and economic considerations to inform decision-making and investments in AT. Evidence around the fiscal benefits of AT investment for local governments has not been systematically identified. This scoping review sought to explore the existing evidence regarding investments in AT and opportunities for savings on municipal expenditures and revenue generation. In total, 7060 records were located and screened; of which 162 full-text articles were reviewed. Ultimately, 23 articles met our inclusion criteria and were included in this review. The available evidence focuses on potential economic benefits of AT in the areas of tax revenues, property values, consumer spending and employment, all of which are relevant sources of revenue generation in municipal operating budgets. An evidence gap was identified regarding AT infrastructure investments and benefits corresponding to municipal expenditures (e.g. maintenance cost savings). Notably, a large portion of literature was published after 2009, suggesting that municipal-level evidence on the fiscal benefits of AT investments may just be emerging.     

Ranking of regional road investment in Norway

This paper explores the priorities for road investments in Norway, with particular emphasis on the use of benefit-cost calculus. The author tests whether the observed rankings of the Ranking Road Agencies are explained and/or influenced positively by the benefit-cost ratio. Second, based on a questionnaire survey, the tradeoff made by Regional Road Authorities between an economic welfare maximizing strategy and the observed strategy in analysed. Benefit-cost ratio is found to be a significant explanatory variable in only four out of fifteen regions. In only one region does benefit cost ratio explain more than 30 percent of the observed variation. The trade-off analysis demonstrates that ranking by benefit-cost ratio if adopted gives formidable return as compared to the observed rankings. The reasons given by the Regional Road Agencies for not ranking investment projects according to benefit cost ratio is that several important impacts are not valued monetarily and therefore are not included in the benefit-cost-ratio. The results of the questionnaire survey give reasons to doubt the Regional Road Agencies understanding of the welfare maximizing principles of benefit cost calculus. Concluding remarks on the observed behaviour of the Regional Road Agencies are also offered.     

Accident cost saving and highway attributes

Two semi-logarithmic regression models are developed to estimate accident rates and accident costs, respectively, for rural non-interstate highways in the state of Iowa. Data on 21,224 accidents occurring between 1989 and 1991 on 17,767 road segments are used in the analysis. Seven road attributes of these road segments are included as predictor variables. Applying the resulting regression models to a rather typical highway upgrade situation, the present value of the accident cost saving is computed. The sensitivity of the estimated cost saving to values for fatal, personal injury, and property damage only accidents is tested.Because factors other than road characteristics greatly influence accident costs, the models developed in this research explain a limited amount of the variance in these costs among road segments. Results of the analysis indicate that the most important attribute associated with accident costs is average daily traffic per lane, followed by conditions requiring passing restrictions and the sharpness of curves. Varying the values for the three categories of accidents shows that results are far more sensitive to the value of personal injuries than fatalities. The feasibility of using predictive models of accident costs in benefit-cost analyses of highway investments is demonstrated.     

Designing pay-per-mile auto insurance regulatory incentives

By converting fixed insurance costs to per-mile charges, pay-as-you-drive-and-you-save (PAYDAYS) insurance would encourage voluntary reductions in driving with concomitant decreases in congestion, air pollution, greenhouse gas emissions, crashes, and insurance claims. Public policies have at time been deployed to require or reward environmental performance in the sale of transportation-related products in the marketplace. For example, the US National Highway Traffic Safety Administration has issued both proposed and final fuel economy rules intended to maximize net benefits through the use of marginal cost-benefit analysis. This paper explores how an analogous benefit-maximizing rule could be structured to encourage adoption of PAYDAYS insurance. The key to designing such a benefit-maximizing rule is to: estimate the net benefits of every mile not driven; estimate the reduction in mileage that would result from PAYDAYS insurance; and, apply these estimates to the calculation of net benefits of every PAYDAYS-insured mile. A mechanism by which the industry itself funds the incentive payments is described, as are alternatives.     

Regulation of the informal transport sector in Rio de Janeiro,Brazil: welfare impacts and policy analysis

In Brazil, the explosion of informal transport activity during the past decade has had profound effects on formal public transport systems and is a source of great controversy in the urban transportation sector. A variety of policies have been proposed to manage the growth of the sector. This study seeks to understand how proposed policies will impact the users of these systems. A corridor in Rio de Janeiro with substantial informal activity was used as a case study. Measures of welfare changes in a discrete choice framework were used to estimate proposed policies’ impacts on users. Eleven candidate policies were evaluated, ranging from the eradication of the informal modes and investment in formal modes, to the legalization of the informal modes. Benefits were compared with costs and the distribution of benefits across income classes was explored. Net benefits from some policies were found to be substantial. Legalizing the informal sector was found to benefit users slightly but further investments in the sector are probably inefficient. Users benefited most from improvements in formal mass transit modes, at roughly 100–200 dollars per commuter per year. Finally, policies to foster a competitive environment for the delivery of both informal and formal services were shown to benefit users about 100 dollars per commuter per year. Together, the regulation of the informal sector and investments in the formal sector serve to reinforce the movement towards competitive concessions for services and help reduce the impacts of cartelization and costly in-road competition.

The urban road pricing scheme to curb pollution in Milan,Italy: Description,impacts and preliminary cost–benefit analysis assessment

Starting from January 2008 Milan implemented a charging scheme to enter an 8 km² area of the city centre. The term used to denote the scheme is Ecopass, conveying the stated political objective of the scheme: a pass to improve the quality of the urban environment (ECO). The charge depends on the Euro emission standard of the vehicle. The paper illustrates the main features and impacts of the Milan Ecopass scheme, and presents a preliminary cost–benefit analysis. The scheme has been effective in curbing not only pollution emissions, but also congestion, and the result has been achieved with low implementation costs and without major political opposition. The cost–benefits analysis presents an overall net benefit. The identification of the winners and losers of the policy is conditioned by penalty payments. Without including the penalties, the surface public transport users and the society at large are the main winners, whereas car and especially freight vehicle users are net losers.