Research 350 - NZ Transport Agency

ECONOMIC DEVELOPMENT BENEFITS OF TRANSPORT INVESTMENT
• SACTRA has made a case for a more ‘fully specified’ SCBA to capture flow-on benefits
such as land use effects and imperfect competition. BTE argues that this is
unnecessary if account is taken of induced demand.
• Where strong evidence exists, consideration of the effect of factors such as logistical
and agglomeration benefits, property and labour market effects, imperfect competition
and specific regional development issues could be considered. 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 it appears these
factors are only likely to be worth addressing for major projects and even then, it is
considered that the effects will generally not be a major issue.
Question 2.2: What alternative approaches exist to assessing the national economic impacts
of transport investments and what are their merits in place of or to supplement SCBA
(particularly to capture any costs and benefits not adequately addressed by SCBA)?
• The principal alternatives to SCBA are macroeconomic approaches such I-O analysis,
CGE modelling or LUTI modelling. These models typically estimate economic impacts
of proposals, i.e. changes in the level and structure of gross domestic product and
associated changes in employment and, in the case of LUTI, land use.
• In comparison with SCBA, these approaches produce different outputs, do not provide
clear decision rules, do not measure the economic efficiency of an investment and do
not include non-market impacts included in SCBA (such as non-work travel time
savings, social costs of crashes and environmental impacts). Moreover, they are limited
by the quality of their data, and are generally inappropriate for projects with small
local impacts.
• 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, aggregating the results of SCBA and CGE modelling
is wrong, and results in double-counting. In addition, the use of CGE modelling to
derive welfare outcomes still faces investment modelling and non-market transactions
issues. In addition, considerable work is required to develop and maintain these
models in return for modest improvements in SCBA accuracy.
• There would therefore not seem to be a strong case for abandoning SCBA for more
complex techniques to account for relatively modest missing benefits. The proposed
alternatives do not provide a reliable substitute and do not appear to be justified on
grounds of parsimony.
Question 2.3: How should the impacts of transport investment on national economic growth
(GDP and similar measures) be assessed; and how do such assessment methods and their
outputs relate to the methods/outputs involved in the SCBA approach?
• I-O, LUTI and CGE models provide some form of national macroeconomic information
of use to policy makers. Depending on the model, these may include data on
employment, income, GDP, land use, investment, trade, consumption, wages and tax.
• CGE modelling is the most accurate and reliable of these methodologies and should be
preferred if national impacts are to be modelled. I/O analysis may be acceptable (and
preferable) within a regional context. CGE can also help pinpoint the effect of impacts
of imperfect competition.
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