Research 350 - NZ Transport Agency

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• Moreover, in many cases, any changes in GDP from individual projects may be extremely small, given the size of national economies relative to the projects in question. Role of transport investment in promoting economic development This chapter sought to address the following key question: • Question 3.1: Are there particular features of transport investment (in general) that make it especially effective (such effects maybe not fully reflected in SCBA or alternative methods of assessment) in promoting/increasing national (and regional) economic growth? The conclusions and observations of this chapter can be summarised as follows: • Evidence for a ‘special role’ in respect of transport infrastructure investment’s economic growth effects (as opposed to effects generated by other public spending, such as on education or health) is limited. The high rates of return to transport investment claimed by some past studies are likely the result of statistical correlation or other model specification issues. • Likewise, there is nothing ‘special’ about investment in transport infrastructure from a regional perspective. While there is some evidence regarding the responsiveness of growth to investment in transport infrastructure, this is no less true then other forms of public spending. It is unlikely that investment in transport infrastructure will have dramatic effects on regional economies. • In general, development of transport infrastructure is a necessary but not sufficient condition for national and regional economic development and growth. • The incremental economic gains of further investment in transport infrastructure in developed economies are likely to be small. Arguably, there is a spectrum within which some developed economies may experience greater gains more than others, but solid evidence to this effect is lacking. • There is no strong evidence that SCBA omits significant flow-on effects to the broader economy. The argument that previous work, citing high returns to transport investment, has somehow revealed SCBA’s ‘omitted benefits’ is therefore unsustainable. Approaches for assessing regional economic and other distributional effects This chapter posed the following questions: • Question 4.1: Is the upgrading of transport links within or to/from a particular (‘disadvantaged’) region likely to be an effective means of enhancing the economic development of that region, and in what circumstances? • Question 4.2: How are the distributional impacts of transport investment on particular regions/areas best assessed; and how do the results of such assessments relate to SCBA assessments of national economic costs and benefits? 10
• Question 4.3: How are the other (non-geographic) distributional impacts of transport investment on different social/demographic and market segments best assessed? • Question 4.4: Would the assessments of distributional (geographic, socio/demographic etc) impacts of transport investments provide useful additional information (additional to the overall impact assessment) for decision-makers? The answers to these questions, along with other key points of interest and relevance, can be summarised as follows: Question 4.1 • Upgrading of transport links within or to/from a given ‘disadvantaged’ region, in and of itself is insufficient for enhancing regional economic development. As is the case for national development, transport is, in general, a necessary but not sufficient condition for regional development. There is a clear need for other supporting programs and infrastructure to be in place. • Further, economic theory offers no conclusive guidance regarding the distributional impact of transport investment on specific regional economies. Issues such as the ‘two way road problem’, the need for supporting measures, well developed transport networks and economic displacement effects cloud the ultimate impacts of transport investment on economic development within a specified ‘target region’. • Analysts such as O’Fallon (2004) have stressed that regional growth may simply result in the displacement of economic activity from one region to another. Though she may overstate her case, displacement effects are a real issue. Question 4.2 • While SCBA offers, perhaps, the best method of assessing the geographic distributional effects of transport investment, the difficulties of ring fencing regional growth effects using ‘either’ SCBA can be significant. A possible (or partial) solution may be the use of origin-destination (O-D) data, other survey work and/or census data to identify regional beneficiaries, through this may be complicated by the nature of regional benefits and migratory movements over project timeframes. • If SCBA is not feasible within a given context, the best approach may be the use of descriptive and/or qualitative indicators (e.g. likely changes in regional income, land values) in conjunction with a global SCBA. • I-O modelling could be used as a complement to SCBA at the regional level if there is a need to assess economic impacts as opposed to benefits. CGE analysis is generally not practical at a regional level. • Whether SCBA is used alone or in combination with I-O analysis, regional economic appraisals should also take into account impacts on other regions and the national economy as a whole. Doing so would allow for an examination of inter-regional displacement effects – or at least in comparison to the broader national viewpoint. Not to do so risks presenting a distorted picture of net benefits (SCBA) or impacts (I- O analysis). 11
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Research 350 - NZ Transport Agency

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