Research 350 - NZ Transport Agency

ECONOMIC DEVELOPMENT BENEFITS OF TRANSPORT INVESTMENT
Transport Interface (LUTI) modelling. These focus on broad measures of economic
impact such as employment, income and GDP and lack such specific decision rules.
• The inclusion of induced and diverted demand effects within a SCBA effectively
captures most of the indirect (or flow-on) effects to the broader economy associated
with a transport improvement. So long as a transport SCBA allows for induced and
diverted demand effects, the extent to which it ‘misses’ economic benefits will be
small to modest.
• Even if induced/diverted demand effects are omitted, (i.e. a ‘fixed trip’ travel matrix is
used) the degree of benefits underestimation will generally be modest, since induced
traffic effects are generally small and transport improvements are unlikely to have a
dramatic economic effect on competitive, modern economies such as New Zealand’s.
• Technically speaking, the difference between results obtained using fixed and variable
trip matrix may be large in extremely congested situations, where allowance for
induced traffic may actually reduce benefits to existing users (and thereby total
benefits). However, to the extent this occurs, benefits may be overestimated rather
than underestimated by use of a fixed trip matrix.
• Where strong contextual (and material) evidence exists, consideration of the relevance
of additional factors such as additional logistical and agglomeration benefits, property
and labour market effects, imperfect competition and specific regional development
issues could be considered on a less formal, case by case basis. This could involve
consultation with key affected industries and stakeholders.
• If these additional effects are not amenable to monetization and incorporation within
an SCBA they could be considered in a ‘below the line’ qualitative analysis.
• However these factors are only likely to be worth addressing for major projects.
Further, it is considered that allowance for such effects will not be an issue in the great
majority of such cases.
• Allowance for environmental externalities may be made either within an SCBA or
‘below the line’, depending on issues of context and data availability.
5.1.3 Question 2.2
• Arguably, ‘alternatives’ to SCBA include macroeconomic approaches such as I-O
analysis, CGE modelling or LUTI modelling. These could be used to estimate the
economic impacts of transport investment.
• However, these approaches produce different ‘raw’ outputs to SCBA (i.e. they report
macroeconomic impacts), do not provide clear social decision rules (unlike SCBA), do
not measure the economic efficiency of an investment and do not include some of the
non-market commodities allowed for by SCBA (such as some non-work travel time
savings). Further, unless a nationwide investment scheme is envisaged, these
alternatives may constitute something of a ‘blunt instrument’.
• As such, undertaking SCBA is fundamental to the appropriate assessment of benefits
and costs of transport investment.
• Some attempts have been made to estimate changes in economic welfare associated
with a given project (i.e. equivalent to that derived via SCBA) through the use of
modified CGE modelling. However, adding up the results of SCBA and CGE modelling,
106