Research 350 - NZ Transport Agency

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ECONOMIC DEVELOPMENT BENEFITS OF TRANSPORT INVESTMENT region) it may well be the case that implantation of the project will draw scarce resources (labour, capital) away from other underdeveloped regions and competing projects. The theme of economic displacement has been taken up by a number of New Zealand based studies and authors. Thus, Brown, Copeland & Company Limited (2004) note that funding for the Transmission Gully project may cause other Transfund sponsored projects to be cancelled or postponed (p. 16). While these authors note that the end result may be more economically efficient if Transmission Gully is judged to have a higher BCR then other regional projects – the fact remains that the economic impacts might involve a displacement of resources away from other regions. O’Fallon (2004, p. 10) notes contributions to ECTM indicating that transport investment may only result in the ‘reshuffling’ of activities within a region by encouraging concentration of some activities in some area and the ‘de-concentration’ in others. This will result in little net economic growth at the national level (though it should be noted that this does not preclude growth for particular regions). Likewise, she also argues that travel time savings arising from the implementation of new projects may well be diverted into increased leisure time rather then work, limiting productivity gains. In addition, by encouraging the growth of urban sprawl, travel times may not be reduced at all, as workers may now live further away or work elsewhere, while nontransport intensive industries are unlikely to experience any benefit (O’Fallon 2004, pp. 13- 14). Thus, there will be little net impact on economic growth. Reviewing ACG’s (2004) work O’Fallon (2004) states that in all cases (except the ‘passing lanes’ project) the regional benefits were expected to outweigh national economic benefits, providing evidence of a displacement effect (p. 5). In particular, with reference to the Auckland Western Ring Road Package, she argues that ACG’s work supports the concept that labour and industry will be displaced from other regions to Auckland and that national growth will be quite marginal (p. 16). While O’Fallon’s arguments have implications on both the national and regional levels she appears to overstate her case and contradict her other criticisms of ACG’s modelling. The diversion of travel time savings into non-work activities is well-known as an issue within transport economics and may arguably lead to the overestimation of the efficiency gains from travel time savings in some contexts (BTE 1999, p. 34). However, this is something of a technical issue and does not invalidate the concept that there are efficiency benefits arising from travel time savings on a regional or national level. Further, the ‘urban sprawl’ arguments ignores the likely positive amenity of improved housing conditions and related construction impacts, i.e. the transmission of the ‘missing’ travel time benefits into other sectors of the regional and national economies. Moreover, from a pure ‘economic impacts’ perspective, O’Fallon herself criticises ACG’s modelling for double counting the impacts of non-work travel time savings with private consumption gains, as time and money saved on travel is used in other ways (p. 5). However, presumably, the same could be said of travel time savings which people have actually converted into leisure time. Finally, O’Fallon’s interpretation of the ACG work as indicating economic displacement effects is clouded both by uncertainty over O’Fallon’s own use of the term ‘benefits’ and by difficulties in interpreting ACG’s own work, given likely double counting. 90
4. APPROACHES TO ASSESSING REGIONAL ECONOMIC AND OTHER DISTRIBUTIONAL EFFECTS Displacement effects can also occur within a given region. For example, the BTE’s review of the impacts of highway bypasses on Mittagong and Berrima in NSW indicated that the social and financial impacts had clearly been positive in the case of Berrima. However, for various reasons they were far more ambiguous in the neighbouring town of Mittagong and it is unclear if other regional towns in Southern Highlands of NSW (such as Bowral) gained or lost visitors (BTE 1994). The issue of economic displacement is also connected with considerations of the ‘population of standing’, discussed above and the discussion of assessment methods and the issues of modelling constraints. In particular, there is a need to clearly define who the intended beneficiaries of a given project are. As the BTE notes, in reality benefits accrue to populations rather than regions (BTE 1999, p. 151). From a regional perspective, some possibilities might include: 1. The existing population within a region at the date of the projects commencement; or 2. As per 1. above plus allowing for any regional in-migration and out-migration connected with the implementation of the project (over a defined period); or 3. As per 2. but also including impacts on other regions and the nation as a whole. The BTE suggests that caution should be exercised in including ‘in-migrants’ in the study scope, and (if they are included) caution should be exercised attributing benefits to such migrants (BTE 1999, p. 153). However the BTE’s response does not appear to adequately cover the issue of long term population shifts over the lifetime of a project (typically 30 years or so). This issue is further addressed below. Once the beneficiaries are defined, the issue of whether (or how) to deal with any displacement effects then arises. There are two broad responses to the possibility of economic displacement: 1. Ignore it – Since the focus of a given regional study is on regional development, to the extent that displacement impacts on other regions are incorporated in a given model (an issue in itself) they should be set aside. 2. Allow for other regional and perhaps national impacts – Impacts on other regions should be allowed for to gauge the broader effects of the proposed development. In practice, it is improper to ignore the impact of transport development projects on other regions, particular given the issues raised above. SACTRA also comes to this conclusion, noting that the initial impacts of a given transport development may be quite different from its final impacts (given its impacts on the national economy) – i.e. initial ‘winners’ may end up ‘losers’. This reinforces the need to consider impacts on other competing areas as a part of an appraisal (SACTRA 1999, Summary Report, para. 40). Some attention may also be paid to the issue of distribution within a given region. 4.3 Assessment of regional economic effects – appraisal of approaches If anything, assessing the regional economic impacts of transport projects poses more problems for the analyst than those faced in assessing national benefits. 91
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