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  • INVESTMENT IN TRANSPORT INFRASTRUCTURE AND ECONOMIC DEVELOPMENT: RECENT DEBATES

    IN THE UNITED STATESAndrew R Goetz

    Department of Geography and Intermodal Transportation Institute

    University of Denver

    Transport Studies Unit Seminar Series Oxford University

    9 March 2011

  • ECONOMIC CRISIS OF 2008:$700 Billion US Government Bank

    Bailout and Economic Fallout

    Source: Financial Forecast Center 2009

  • DEBATE OVER ECONOMIC STIMULUS PACKAGE

  • US TRANSPORTATION INFRASTRUCTURE CRISIS

  • INTERNATIONAL TRADE

  • Growth in Trade as a Percentage of US GDP

    Source: AASHTO (2007) Transportation: Invest in Our Future

  • HIGHWAYIMPACTS

    Source: Bingham 2006

  • INTERSTATE BOTTLENECKS

    Source: AASHTO (2007) Transportation: Invest in Our Future

  • Traffic Congestion

    Source: AASHTO (2009) Transportation: Are We There Yet? The Bottom-Line Report: 2009, p. 21.

  • Minneapolis I-35W Bridge CollapseAugust 1, 2007

  • BRIDGE CONDITIONS

    Source: AASHTO (2009) Transportation: Are We There Yet? The Bottom-Line Report: 2009, pp. 22-23.

  • The Commission believes that to meet 21st Century transportation needs, it is necessary for Congress to establish a new Federal Compact with the American people.

    The Commission believes that it is critical to Americas future to:

    Create and sustain the preeminent surface transportation system in the world.

  • Opposing Perspectives

  • Public Spending in Japan

    1990-2000: Japans Lost Decade

    1991-2008: $6.3 trillion spent on construction-related public investment to stimulate economy

    Controversy over economic impacts

    Hamada Marine Bridge, Japan

    Connects Hamada to small, sparsely-populated island

    Cost: $70 million

    Source: Fackler (2009) Tokyos wasted trillions buy a costly lesson. International Herald Tribune, February 6, 2009

  • Proposed Gravina Island Bridge: Alaskas Bridge to Nowhere

    Part of SAFETEA-LU 2005 federal transportation act

    Would have linked city of Ketchikan to the island where its airport is located (now connected by ferry)

    Cost: $398 million Symbol of uncontrolled

    pork-barrel politics

  • Economic Impacts of Transport Infrastructure Investment

    1. Conceptual and Theoretical Background2. Review of Empirical Literature

    a. Summary of pre-2000 periodb. Analysis of post-2000 studies

    3. Recent Debates in the United Statesa. American Recovery and Reinvestment Act of 2009b. New Jersey Tunnel Projectc. Federal High-Speed Rail Program

    4. Conclusions and Areas for Future Research

  • CONCEPTUAL AND THEORETICAL BACKGROUND

    based in part on

    Rietveld & Bruinsma 1998Banister & Berechman 2000Mikelbank & Jackson 2000

    Bhatta & Drennan 2003Vickerman 2007

    Lakshmanan 2010

  • Commonly-Used Measures

    Transport Infrastructure

    Physical extent (eg highway miles)

    Monetary investment

    Accessibility

    Travel time/cost

    Various nodal measures

    Economic Impacts

    Direct and Indirect

    Output (eg, GDP)

    Productivity (output per unit of input)

    Costs of production

    Employment, income, wages, property values

    SCALE: International, National, Regional, Metropolitan, City, Neighborhood

    TIME FRAME

    Cohesion

  • Theoretical FoundationsClusters of Literature

    TRADITIONAL ECONOMIC AND ECONOMIC GEOGRAPHY

    PERSPECTIVES

  • 1. Microeconomic Analysis

    Benefits to individual firms/households Cost/benefit analysis

    Number of Trips

    Cost/Trip D

    D

    S0

    S1

    T0 T1

  • 2. Macroeconomic analysisIncrease efficiency and reduce costs of production

    inputs Production function approach Public capital investment can lead to increases

    in private capital (crowding-in) or decreases (crowding-out)

  • 3. Transport and International/Interregional Trade

    and Spatial InteractionClassical trade theoryUllman (1956) 3 Bases

    of Spatial Interaction Complementarity Transferability Intervening

    opportunitiesTaaffe & Gauthier 1973Krugman 1991

    Isolation

    Region A Region B

    Transport Link and Interregional Trade

  • 4. Transport and Industrial Location: Agglomeration, Spillovers, Core/Periphery

    Classical industrial location theory (Weber 1909; Isard 1948; Smith 1981)

    Firm Behavior (Markusen 1986; Chapman & Walker 1992)

    New Economic Geography (Krugman 1991; Fujita, Krugman, and Venables 1999)

    New role of transport in economic growth Freight logistics (Hesse & Rodrigue 2004;

    Bowen 2006; Leinbach & Capineri 2007) Passenger mobilities (Sheller & Urry 2006;

    Cresswell 2006; Dodge & Kitchin 2004)

  • Typical sequence of transport network development (Taaffe, Morrill, and

    Gould 1963)

    5. Historical Models and Spatial Economic Theory

    New frontier and bypass effects

    Taaffe, Morrill, & Gould 1963; Vance 1964; Cronon 1991

    Growth poles, spread and backwash

    Hirschman 1958

  • Bypass Phobia

    Why is Denver, one of this planets smaller major cities, building one of the worlds largest airports? . . . Denver suffers from by-pass phobia. As one of the worlds most isolated major cities, the Mile High City has always been afraid the world would pass by without noticing the little city in the middle of nowhere (Noel 1994).

  • Radiator Springs syndrome

  • 6. Transport and Urban Land Use/Values

    Classical Urban Land Use Theory

    Based on Von Thunen, Alonso

  • Conditional Degree and Direction of Causality

    Transportation is one of several factors that are important to economic development (Banister & Berechman 2000, 2003; Giuliano 2004)

    If X, then Y vs. If A, B, C, . . . and X, then Y1. Transportation is a necessary but not sufficient

    condition2.Transportation is neither a

    necessary nor sufficient condition

    Diminishing returnsLeading or lagging indicatorImportance of context

  • Airports and Urban Growth

    Despite the documented relation between airports and urban growth, airports are not a panacea for lagging economic development

    Field of Dreams--If you build it, will they come?

  • ALTERNATIVE THEORETICAL PERSPECTIVES

  • Limited Government/Free Market Perspective

    Most public spending is wasteful, in both theory and practice (CATO Institute, Reason Foundation, Heritage Foundation)

    Private sector is more efficientTransportationPrivatization, tolling,

    congestion pricing

  • Better Allocation of Public Investment

    Sectors other than transportation will yield a greater economic development return

    Other physical infrastructurewater, electric power, communication systems, internet connectivity

    Social infrastructureeducational systems, job training

  • The Role of Transport in Sustainable Development

    Is more transport investment always better? Environmental and social externalities Unlimited mobility is neither possible, nor

    desirable Decoupling transport growth and economic

    growth (Stead & Banister 2006) Some transport modes are more sustainable

    and are more beneficial for long-term economic development

  • Transport Investment and Sustainability

    Disconnect between economic impact literature and sustainability literature

    Role of sustainable transport in long-term economic development

    Challenges of incorporating social and environmental factors in economically-driven cost/benefit analyses

    Social

    Environmental Economic

    Sustainability Triangle

  • Review of Empirical Literature

    Summary of Pre-2000 PeriodAnalysis of More Recent Studies

  • Early studies

    US Interstate Highway system (eg, Garrison et al 1959)

    Appalachian highways (eg, Gauthier 1973)Macroeconomic studiesJapan, 1954-1963 (Mera 1973)Aschauer (1989, 1990); Munnell (1990) Found very high public capital output elasticities

    (0.31-0.39) for US, 1949-1985 Prompted critiques and many other studies

    during the 1990s

  • Summary of 40 Studies, 1989-1999(Bhatta and Drennan 2003)

    15 studies calculated output elasticities Results: range from +0.04 to +0.399 studies calculated changes in costs of production Results: range from -0.05 to -0.2114 studies analyzed changes in employment, income,

    wages, or property values 9 found significant positive relation between public

    transport capital and economic benefit 3 found no significant relation 2 found negative relation2 studies calculated rate of return on public capital Nadiri & Mamuneas (1994) results: range from 4.9 to

    7.2% compared to 8.65% for private capital

  • Summary of 40 Studies, 1989-1999(Bhatta and Drennan 2003)

    Hypothesis: Public sector investments in transportation infrastructure result in long-term economic benefits on the production, or supply side, such as increased output, increased productivity, reduced costs of production, or increased income.

    Conclusion: A preponderence of the studies reviewed could not reject the hypothesis.

  • Empirical Studies1999-2009

    Search using ISI Web of Science56 studies analyzed 43--positive results 13--no impact or negative resultsKey Findings Wide variation, though numerical results are generally

    more modest than earlie