Should the user pay?

The paper puts the case that historical analysis helps to understand current discussions on user-pays principles and practice. In particular, (a) it is demonstrated that the nature of funding systems is dominated by political considerations, and (b) user-pays systems lead to inadequate funding of infrastructure when politically controlled, but provide funds for expansion when “market-driven” (in pursuit of profit maximisation). The case is illustrated by reference to the experience of interregional transport infrastructure in 19th century in England and 20th century Australia. Revenue deficiencies arising from government-controlled rates can lead to the demise of private transport infrastructure. The problem is considered in the context of the history of interregional roads and railways in England between the 15th and 19th century in England and in Australia in the 19th and 20th century. The current embrace by government of the user-pays system in transport services arises from fiscal deficiencies, as much from economic philosophy. User-pays policies are part of the global re-emergence of economic rationalism since the 1970s. The lesson for other nations from Australia's experience is twofold. First, in a federal system of government, despite the efficiency benefits of user-pays in interregional land transport, fiscal and political objectives will prevail. Second, in sparsely populated and/or developing countries, deregulation of long distance road transport will make funding a national highway system a critical concern.     

Impacts of Transport Infrastructure on Productivity and Economic Growth: Recent Advances and Research Challenges

ABSTRACT

The paper provides an update of the survey focusing on estimating the contribution of transport infrastructure to productivity and economic growth. The central questions addressed are possible reasons behind the conflicting results reported in the literature on the elasticity of economic output with respect to transport infrastructure investment. After providing a systematic review of recent empirical studies on the effects of transport infrastructure on productivity and economic growth, the paper notes that controversial results can be attributed to ten causes (grouped into three categories for distinguishing): (1) related to different contexts: research period, geographical scales, and country's capability in enabling economic development; (2) related to different phenomena that are being measured: different economic sectors, different types of transport infrastructure, and different quality levels of transport infrastructure; and (3) related to distinct ways of measuring a similar phenomenon: measures used to describe the dependent variable and explanatory variable, functional specification, and estimation method of the econometric model. Strong network externalities of transport infrastructure may result in nonlinearity of the relationship between transport infrastructure and economic growth. Moreover, the absence of spatial concerns in infrastructure's impacts is another important source of inconclusive results. Finally, building on recent literature, the paper has discussed policy implications and identified several research avenues for further research.     

Transport infrastructure costs in low-carbon pathways

The rate and manner in which transport infrastructure (e.g. roads, railway tracks, airports) is deployed, will play an important role in determining energy demand, greenhouse gas emissions and the economic impact of the transport sector. This paper describes an exercise where the costs of infrastructure deployment for the transport sector have been incorporated into the IMACLIM-R Global E3 IAM. In addition to adding these costs, the modelling of the criteria for the deployment of infrastructure for roads has also been improved. It is found that this model recalibration results in a more accurate baseline as compared to historically observed data (2001–2013) for investments in energy demand, road infrastructure, and passenger kilometers travelled. Regarding macroeconomic effects, it is found that the imposition of a carbon emission trajectory to 2100 cause GDP to decrease relative to the newly calibrated baseline – this is a standard IAM result. However, when the deployment of infrastructure for roads and air travel is further constrained, the GDP loss is less than with a fixed carbon emission trajectory only. This is because early restriction of infrastructure for roads and air travel allows an expansion of public transport infrastructure which is adequate to meet low-carbon transport service demand whereas when less public transport infrastructure is available, more costly mitigation investments must be made in other parts of the economy. This suggests that restricting infrastructure deployment as a complementary policy to carbon pricing, lowers the cost of mitigation.     

Transport infrastructure and regional economic growth: evidence from China

This article develops a multi-dimensions measurement of transport infrastructure and examines the linkage between transport infrastructure and regional economic growth. A panel data model is estimated using data from a sample of 31 Chinese provinces from 1998 to 2007. The results provide strong evidence that transport infrastructure plays an important role in economic growth. Both land transport and water transport infrastructure have strong and significant impacts, while the contribution of airway transport infrastructure is weak. Furthermore, land transport infrastructure contributes more to economic growth in locations with poor land transport infrastructure, while the investment in water transport infrastructure contribute positively to economic growth only after the investment scale exceeds a threshold level. These results are robust to a variety of alternative methods, the exclusion of possible outliers, and consideration of endogeneity. A retrospective analysis shows that uneven distribution of transport infrastructure is an important reason behind economic disparities across Chinese regions.     

Economic effects of air transport market liberalization in Africa

Although the aviation industry is increasingly becoming important for Africa’s economic development and integration, the ability of airlines to access foreign markets remains hindered by restrictive regulatory policies. Attempts have been made to fully liberalize the intra-African air transport market. Except for general assertions about the merits/demerits of liberalization, our empirical understanding of the welfare effects of such polices in Africa remains rudimentary. This study empirically measures the economic effects of air transport liberalization, mainly on two supply side variables: fare and service quality, measured as departure frequency. The empirical models evaluate how air fares and departure frequency respond to measures of openness in air services agreements, while controlling for other determinants. The results show up to 40% increase in departure frequency in routes that experienced some type of liberalization compared to those governed by restrictive bilateral air service agreements. Furthermore, there is a relatively larger increase in departure frequency in routes which experienced partial liberalization compared to fully liberalized ones. This can be explained by the diminishing marginal effect of progressive liberalization on departure frequency. While the effect of liberalization is substantial in improving service quality, there is no evidence of its fare reducing effect.     

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.     

Spatiotemporal evolution of China’s railway network in the 20th century: An accessibility approach

The interrelatedness of transportation development and economic growth has been a constant theme of geographic inquiries, particularly in economic and transportation geography. This paper analyzes the expansion of China’s railway network, the evolution of its spatial accessibility, and the impacts on economic growth and urban systems over a time span of about one century (1906–2000). First, major historical events and policies and their effects on railway development in China are reviewed and grouped into four major eras: preliminary construction, network skeleton, corridor building, and deep intensification. All four eras followed a path of “inland expansion.” Second, spatial distribution of accessibility and its evolution are analyzed. The spatial structure of China’s railway network is characterized by “concentric rings” with its major axis in North China and the most accessible city gradually migrating from Tianjin to Zhengzhou. Finally, the study indicates that railway network expansion has significantly improved economic development and heavily influenced the formation of urban systems in China.     

Flexibility in planning and development of a container terminal: an application of an American-style call option

The prosperity and social progress of developed and developing economies is highly dependent on the existence of efficient transport infrastructure. Nevertheless, current budgetary constraints are jeopardizing the necessary investments in new or existing infrastructure. New models for planning and managing infrastructure are now necessary to overcome the lack of public economic resources available. Port infrastructure is no exception and, due to the vast number of uncertainties involving these projects, it is relevant to maximize the capture of the latent value of flexible options. Incorporating flexibility in these projects, prior to the implementation phase, can be a solution that allows port managers to address future uncertainties and mitigate risk exposure. This paper analyzes the incorporation of flexibility in port planning through the use of an American call option to the physical capacity expansion problem. The rationale is to implement a flexible expansion plan, through options that can be exercised at any given time, that are able to deal with uncertainty in demand. The paper uses a case study – Terminal Container of Ferrol, in Spain – and the results support the hypothesis that imbedded flexibility will robustly increase the net present value of the project.     

Non‐physical barriers to traffic flow and the PTA programme of action: problems and prospects

A lot of resources have .been committed to the provision of transport infrastructure in Eastern and Southern Africa. Some of these resources have been borrowed from outside and have to be repaid. Hence the need to maximize their use. However, this is being minimized by non‐infrastructural bottlenecks to traffic flow. These range from macro‐economic constraints with implications for passenger (bus) transport such as the non‐availability or acute shortage of foreign exchange to slow, cumbersome documentation procedures particularly for cross‐border traffic.

The Preferential Trade Area (PTA) for Eastern and Southern Africa is geared to the reduction and eventual elimination of actual and potential non‐physical barriers to traffic flow, for which it has instituted a number of schemes. After introductory remarks on the sub‐regional economy, its transport sector and avenues for sub‐regional cooperation and the implementation of these schemes is assessed and other non‐physical barriers yet to be addressed by the PTA are examined before conclusions are drawn.     

Developing Transport Infrastructure in Sub-Saharan Africa through Public–Private Partnerships: Policy Practice and Implications

In contemporary times, Public–Private Partnership (PPP) in transport infrastructure has gained considerable attention in developing regions following its success in the developed countries. However, Sub-Saharan Africa (SSA) is among the developing regions with few transport PPP projects and among the regions with high number of failed projects. Meanwhile the region's transport infrastructure need far exceeds it current provision. This paper therefore aims to examine the project experiences (success and failure factors) of three highly profiled transport PPP projects, namely the Lekki toll road concession project (Nigeria), N4 toll road (South Africa/Mozambique) and Port of Maputo (Mozambique) in order to develop policy measures for effective future implementation. The experiences of the three projects show that transport PPP policy is indeed feasible in SSA. However, to realise its full applicability, proper policy actions and measures must be carefully observed and these include effective and efficient stakeholder management, transparent and competitive tendering process, high participation of local investors, stable macro-economic conditions and strong government commitment and regulatory framework. The projects experiences and policy actions developed are impactful in accelerating transport infrastructure development through PPP approach in SSA. Hence it is hoped that policy-makers and practitioners would be informed on the key strategies to employ in implementing future projects.     

Transport integration of Slovenia with the European Union

Today, the extended transport infrastructure along with the communications and information technologies are to a large extent the generator of integration processes all over Europe. Novelties in this area have brought about important changes in the production conditions, distribution and consumption, which exert influence on the changing of economic structure, including similar changes in social, cultural and political relations. In the future, the social and economic development of Slovenia will depend on proportionate development of regions and on the embodiment of Slovenia in a wider European space. The transport infrastructure of Slovenia, along with its transport system, should be integrated in the European transport system in such a way that the developmental interest of Slovenia is fully highlighted and included to an optimum extent in the course of Slovenia's integration to the EU.     

European freight transport and the environment: empirical applications and scenarios

Environmental issues have received a prominent place in transport policies of most European countries. The coordination of such policies however, is fraught with many difficulties. The increasing freight flows after the European integration are a source of concern, but have not yet led to straightforward and effective environmental strategies.The paper focuses on the Trans Alpine freight transport systems in the light of the future integration of single national transport systems into the European transport network. The environmental, social and institutional peculiarities of this ‘region’ have favoured—in the past—the development of strong nationally-oriented policies, partly in contrast with the goals promoted by the European Union. The present analysis aims to highlight opportunities, and limits inherent, in the implementation of various infrastructure projects oriented towards a drastic change of the Alpine transport systems structure. The Alpine countries, viz. Austria and Switzerland, play a central role in the promotion of environmental benign modes of transport of goods, with a clear focus on rail. The route choice and modal split of freight flows in Europe are taking place simultaneously. In this paper the results of European freight flow models (based on logit analysis and neural networks) will be presented. An important exercise is then to assess the consequences of various types of eco-taxes on road transport in Europe. In this context, several policy scenarios will be dealt with.     

Impact of Everyday Weather on Individual Daily Travel Behaviours in Perspective: A Literature Review

Despite the hundreds of billions of dollars being spent on infrastructure development -- from roads, rail and airports to energy extraction and power networks to the Internet -- surprisingly little reliable knowledge exists about the performance of these investments in terms of actual costs, benefits and risks. This paper presents results from the first statistically significant study of cost performance in transport infrastructure projects. The sample used is the largest of its kind, covering 258 projects in 20 nations worth approximately US$90 billion (constant 1995 prices). The paper shows with overwhelming statistical significance that in terms of costs transport infrastructure projects do not perform as promised. The conclusion is tested for different project types, different geographical regions and different historical periods. Substantial cost escalation is the rule rather than the exception. For rail, average cost escalation is 45% (SD=38), for fixed links (tunnels and bridges) it is 34% (62) and for roads 20% (30). Cost escalation appears a global phenomenon, existing across 20 nations on five continents. Cost estimates have not improved and cost escalation not decreased over the past 70 years. Cost estimates used in decision-making for transport infrastructure development are highly, systematically and significantly misleading. Large cost escalations combined with large standard deviations translate into large financial risks. However, such risks are typically ignored or underplayed in decision-making, to the detriment of social and economic welfare.     

The spatial productivity of transportation infrastructure

Transportation infrastructure services may cause an impact on the economy of the region in which they are located and, additionally, they are likely to have an impact on other regions. This effect has been labeled the spillover effect. In this study, the existence of direct and spillover effects of road, railway, airport and seaport infrastructure projects is tested by estimating a production function. Together with this primary objective, two common concerns in the literature are addressed: the lack of theoretical foundations for spatial econometrics models and the likely endogenous relationship between transport infrastructure and economic development. The estimated production function takes the form of a Spatial Durbin Model and is estimated using panel data from the 47 peninsular Spanish provinces by alternatively applying a Maximum Likelihood estimator and Instrumental Variables/Generalized Method of Moments estimators. According to the estimates, road transport infrastructure positively affects the output of the region in which the infrastructure is located and its neighboring provinces, while the remaining modes of transportation projects cause no significant impacts on average.     

Infrastructure maintenance,regeneration and service quality economics: A rail example

This paper proposes a formalized framework for the joint economic optimization of continuous maintenance and periodic regeneration of rail transport infrastructure taking into account output consisting not only in traffic levels but also in track service quality. In contrast with much optimization work pertaining to spatially contiguous maintenance works, its principal economic emphasis and objective focus are centered on the optimal allocation of current maintenance and periodic renewal expenses, on their yearly distribution among large network partitions, and on infrastructure pricing. The model equations are based on very simple assumptions of infrastructure degradation laws and on a manager's objective function optimized through optimal control procedures. Equations are tested on national French rail track segment databases using Box–Cox transformations and match rail regeneration and maintenance practices prevailing in France. More generally, the paper makes a broad contribution to capital theory, on the optimal maintenance and renewal of equipment, and defines a method applicable not only to other transport infrastructure but to a wide range of capital goods, including housing, cars and industrial machines.     

Achieving political acceptability for new transport infrastructure in congested urban regions

This paper analyzes the efficiency and political acceptability of road pricing and infrastructure policies targeted at relieving urban congestion. It combines a stylized transport model of an urban road network with a model of the political process that incorporates interactions between voters, citizen interest groups and politicians to explore the possibilities to reach political acceptability for efficient transport policies. In a numerical illustration, the paper compares a set of pricing and investment policies in terms of efficiency and acceptability. The illustration shows how conflicting interests can lead to non-efficient policies being chosen.     

Promoting Development through Multimodal Freight Transport in Bangladesh

Abstract

Development emanating from international trade and investment in many least‐developed economies is impeded by inland freight transport systems that restrict multimodal transport. Increasing international trade may raise gross domestic product, generating increased demand for internal containerized cargo movements, but the requisite transport infrastructure is lacking. The paper explores impediments to developing effective multimodal transport and possible solutions in Bangladesh, which is an extreme case in point. It reports applications of Delphi techniques that explored local expert opinions regarding policies required to tackle such impediments. A panel of corporate executives perceived a changing inland transport system poorly suited to efficient origin‐to‐destination cargo movements in international supply chains. To promote further development, customs procedures must be streamlined and Bangladeshi shippers must adopt a door‐to‐door transport system.     

When are subsidies to trans-European network projects justified?

The trans-European transport network (TEN-T) encompasses the major planned transport infrastructure in Europe, ranging from high speed rail to port infrastructure. Projects in this category are considered priority projects and receive European subsidies; but these have been insufficient to get these projects off the ground. This paper addresses two research questions. First, it sketches the basic economics of cross-boundary infrastructure projects: what pricing and investment policies can we expect, what is the role of through traffic and high fixed costs of infrastructure? Second, it examines briefly what lessons the EU could draw from the experience of other existing federal funding institutions like the US and Germany. These ideas are used to propose a new subsidy scheme for the TEN-T projects.     

Has the transport-led economic growth effect reached a peak in China? A panel threshold regression approach

Using China’s province-level panel data from 1987 to 2010, this study explores the optimal level of transport infrastructure accumulation maximizing the growth rate. We investigate under what circumstances can additional transportation infrastructure capacity positively affect economic growth, based on panel threshold regression models. Our empirical findings suggest that there is a non-monotonic relationship between the stock of transport infrastructure and the long-run growth rate. The magnitude of transport-led economic growth effect significantly depends on the level of the existing transport network. The empirical results identify two endogenous cut-off points of efficiency of transport-led economic growth effect. When the highway network density is lower than 0.17 km/km², an insignificant positive relationship between highway infrastructure accumulation and economic growth was found. When the highway density is estimated between 0.17 and 0.38 km/km² or higher than 0.38 km/km², expanding the highway network has a significant positive effect on economic growth, but the magnitude of the impact is weaker in the latter, with the estimated coefficients equal to 0.23 and 0.09 respectively. Although China still enjoys a positive economic growth effect led by building more large-scale highway infrastructure, the magnitude of the effects of most provinces in China has already passed the saturation point and continuously expanding the highway network is not very productive.     

Towards a transport policy for the ECOWAS subregion

This paper examines transport policy development in a regional grouping of states whose present transport policies reflect their differing colonial pasts. In addition to locational and physical factors, vested interests in preserving present arrangements, lack of assessment of the repercussions of integration, and lack of political will to surrender to a supra‐national authority decisions which will be binding at the national level are identified as major factors militating against the successful formulation of a common transport policy in West Africa.

It is suggested that, although major changes of policy are often difficult and costly to implement, there is the need to effect institutional changes within the subregion in order to achieve the transport objectives of the ECOWAS treaty.