1

TRANSPORTATION

Externalities Definition:
The producer and consumer are the main two parties in the
economic transaction, with third parties which are indirectly affected.
The third parties could be individuals, a resource, property owner, or
organizations. The last mentioned parties which are effected called
externalities. Economic externalities refer to transactions that occur
between two parties where either party assess a cost or grants
advantages on a third party where there is no practical way of
compensating the affected party. So, externalities are the result of one
party's deeds on the prosperity of another.
Externalities are categorized into two different categories:
positive and negative. Positive externality is the advantage that is
enjoyed by a third-party as a consequence of an economic transaction.
A negative externality makes a reverse impact on bystanders. It is an
eighth which is brooked by a third party as a consequence of an
economic transaction.

Transportation infrastructure externalities:

2
TRANSPORTATION

Due to its outstanding growth in recent decades, transportation

has become a strategic sector of the economy and a major contributor
to social and economic progress. As transportation infrastructure is
known to be one of the primary sources of externalities worldwide, I
choose to make my assignment about it.

Positive externality:
Transport infrastructure positive externalities could include the
raises in property value. Property values may raise because of
improved accessibility and potential agglomeration benefits. For
example, increased accessibility results in higher land values and as a
result car parking becomes a less viable option for town center space.
Also, with the introduction of road pricing in urban centers, areas
outside a priced zone may become more attractive and increase in
value.
There are many studies done to identify the impact of new
transport infrastructure on residential properties in districts through
which the lines pass. The goal of the studies was to determine if the
improved accessibility by means to transport investment in the area
had any effect on property values. They found that there was an
average increase in values of properties near to the transportation
network opened. The influence of transport on property values

3
TRANSPORTATION

depends on four factors; the availability of transport, transport costs,

travel time and the convenience of transport modes.

Negative externality:
Pollution is a major negative externality of transport systems. As
transport activities level is getting higher, their environmental impacts
get higher and are being felt by the local community, particularly, the
case for large transport terminals, such as ports, rail yards, and
airports.
Air pollutant:
Many air pollutants have been identified as being closely
related to transportation. An odorless and colorless gas Carbon
Monoxide (CO) is the result of the incomplete combustion of
hydrocarbons. A percentage of 70 to 90% of total carbon monoxide
emissions accounts of transportation. Thus, It is the transportation the
most strongly air pollutant.
Water Pollutants
Transportation is significantly contributing to the pollution of the
hydrosphere in many ways ranging from air pollution collapses to the
construction and maintenance of infrastructures such as ports, railways
and roads. Transportation could account for up to 25% of nitrogen

4
TRANSPORTATION

fallouts in water in some areas. More than 75% of the growth of acidity
of lakes account for acid rains.
Noise
Road accounts for approximately 70% of total noise emissions by
transportation. The different transport modes have different scales of
noise emissions. The friction of the wheels and the engine are main
sources of noise. Intensity of noise is directly linked to the intensity of
traffic and travel speed.

The transportation externalities relation to the willingness to

pay (WTP) analysis
As the transport has adverse effects of pollution, it have hardly
been taken into consideration when planning strategies. The need to
account these externalities is essential to ensure sustainability of the
transport sector and economic growth. Recently, there is general
agreement

regarding

the

need

to

internalize

these

negative

externalities, by handling them as a priority when formulating

infrastructure policy and logistics strategy. The European Union, for
example, has developed an infrastructure use taxation system based
on the user and polluter pays principle.
Reference:

5
TRANSPORTATION

Author A.A & Author B .B (2015), negative externalities, available

on

http://www.economicsonline.co.uk/Market_failures/Externalities.html
- Mike Wrigley &Peter Wyatt (27-29 June2001), TRANSPORT POLICY
AND
PROPERTY VALUES, available on
http://eres.architexturez.net/system/files/pdf/eres2001_300.content.pdf
-

Fernando Lera , Javier Fauln, Mercedes Snchez , Jonathan Calleja

& Blanco, Analysis of the Willingness to Pay to Reduce
Environmental Impacts from Road Transportation: A Case Study
from the Spanish Pyrenee, available on
http://www.navarra.es/NR/rdonlyres/01127969-9DBE-4FF5-AF944416CA83D049/223813/04AnalysisoftheWilli.pdf