Economic Effects - Transportation Benefit-Cost Analysis 15/05/2020 19:02

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Benefit-Cost Analysis Economic Effects
When to Use Benefit-
Cost Analysis
BCA vs. Economic Transportation projects can have various impacts on a a
Impact Analysis
community’s economic development objectives, such as
Analysis Framework
productivity, employment, business activity, property values,
Perspective and Scope
investment and tax revenues (in this case "community" can range
Defining Alternatives
in scale from individual households to cities, regions, nations or
Geographic Scope
even the entire world).
Level of E!ort
Project Description In general, transport projects that improve overall accessibility
Project Schedule (i.e., they improve businesses ability to provide goods and
Analysis Purpose services, and people's ability to access education, employment
Project Objectives and and services) and reduce transportation costs (including travel
Impacts
time, vehicle operating costs, road and parking facility costs,
Time Period of Analysis accident and pollution damages) tend to increase economic
Benefits productivity and development. Care is needed to avoid double
Travel Time counting impacts that are already counted in travel time and
Vehicle Costs vehicle cost savings, emission or safety benefits. Many economic
Safety impacts are economic transfers (one person, group or area
Emissions benefits at another's expense) while others are true resource
Greenhouse Gases changes (overall economic productivity increases or declines). In
Induced Travel many situations, the distribution of impacts is important; for
Travel Time Reliability example, from the perspective of the people who gain from an
Noise economic transfer, it is a true benefit, but not from society's
Construction overall perspective.
Disbenefits
Habitat and Water It is important to consider the full range of economic impacts,
Quality
both positive and negative, that a transport project may cause.
Economic E!ects
For example, an urban highway expansion may improve
Community Impacts
motorists' access and reduce their costs per vehicle-mile, but by
Parking Costs
creating a barrier to pedestrian travel and stimulating more
Equity and Option
dispersed land use development patterns, reduces access by
Value Benefits
other modes, and increases the total amount of travel required to
Costs
reach destinations. Similarly, improving access to a particular
Initial Costs
area can expose businesses to more competition (for example, if
Continuing Costs
previously captive local customers can more easily access
Rehabilitation Costs

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End of Project Costs regional shopping centers), reducing business activity there.
Types of Measures
Benefit-Cost Ratio Examples
Net Present Value
Cost E!ectiveness
A new highway or public transport service increases a
Internal Rate of Return
community's access to other areas. This increases
Payback Period
businesses' labor pool, reduces their costs to obtain input
Graphical
Representation materials and services, and expands their potential market.
Calculation Issues
This may increase "economies of scale" in production
Valuing Benefits
processes, which means higher productivity through lower
Inflation
costs per unit of output.
Discounting
Improved accessibility may increase workers' ability to
Transfers and Double
access education and employment opportunities
Counting (increasing their productivity and incomes), and increase
Joint and Sunk Costs residents' access to more shopping opportunities
Uncertainty (providing financial savings), and increase access
Sensitivity Analysis to recreation and cultural opportunities (increasing their
Presentation welfare).
BCA Models and Tools Mobility management strategies, such as more e#cient
Parameters road pricing, can improve travel time reliability, which
Published Guidance and reduces logistics and scheduling costs beyond just the
References travel time savings.
Other Websites New transportation links between cities and ports, and new
Acknowledgements types of inter-modal facilities and services at those
TRB Transportation locations, make it possible for new patterns of international
Economics Committee trade to develop. In some cases, the new links may improve
Sitemap the e#ciency of business customer/client visits as well as
product deliveries.

Relationship to Other Benefits and Costs

In all of the above examples, the benefits flow to parties that

depend on transportation facilities and services for their
activities. In some cases, the ultimate beneficiary is the business
operation that can achieve operating cost savings or greater
productivity (output per unit of cost). In the case of cargo
deliveries, the beneficiaries may be senders and receivers rather
than the transportation company that actually does the traveling.

It is also possible to account for many business operations and

scheduling benefits, as well as logistics benefits and production
economies of scale, as additions to the valuation of travel time
benefits for truck trips. Alternatively, they can be addressed
separately as additional economic benefits.

Finally, it is important to note that there are many broader forms

of economic impacts on communities, regions and states — in

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which transportation facilities lead to business expansion,

additional job creation and additional tax revenues. Those
economic impacts reflect a combination of the productivity
benefits discussed here and broader business attraction impacts
that also a!ect local economies. This is discussed further in the
separate section on economic impact analysis.

Resources

ASTRA (Assessment of Transport Strategies) (www.iww.uni-

karlsruhe.de/astra/summary.html), is a set of integrated transportation
and land use models that predict the long-term economic and
environmental impacts of different transportation and land use policies in
Europe. The Final Report, is available at www.iww.uni-
karlsruhe.de/astra/ASTRA_Final_Report.pdf.

Cambridge Systematics (1998), Economic Impact Analysis of Transit

Investments: Guidebook for Practioners, Report 35, TCRP,
Transportation Research Board (www.trb.org).

EDRG (2001), Guide for Using Empirical Information to Measure

Economic Impact of Highway Investments, Federal Highway
Administration, Economic Development Research Group
(www.edrgroup.com).

EIO-LCA Model (www.eiolca.net) is a computer model that quantifies the

economic and environmental impacts of producing goods or services,
including productivity, energy consumption and pollution emissions.

David Forkenbrock, Sondip K. Mathur and Lisa A. Schweitzer (2001),

Transportation Investment Policy and Urban Land Use Patterns
University of Iowa Public Policy Center (www.uiowa.edu).

David J. Forkenbrock and Glen E. Weisbrod (2001), Guidebook for

Assessing the Social and Economic Effects of Transportation Projects,
NCHRP Report 456, Transportation Research Board, National Academy
Press (www.trb.org).

Daniel J. Graham (2007), Agglomeration Economies and Transport

Investment, Discussion Paper No. 2007-11, Joint Transport Research
Centre, OECD and International Transport Forum, at
http://puck.sourceoecd.org/vl=9745622/cl=32/nw=1/rpsv/cgi-bin/wppdf?
file=5kzbxsv5nnjk.pdf.

Piyapong Jiwattanakulpaisarn, Robert B. Noland, Daniel J. Graham

and John W. Polak (2009), “Highway Infrastructure And State-Level
Employment: A Causal Spatial Analysis,” Papers in Regional Science,
Volume 88 Number 1, pp. 133 – 159; at
http://ideas.repec.org/a/eee/transa/v44y2010i4p265-280.html.

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Economic Effects - Transportation Benefit-Cost Analysis 15/05/2020 19:02

Duncan Kernohan and Lars Rognlien (2011), Wider Economic Impacts

of Transport Investments in New Zealand, New Zealand Transport
Agency (www.nzta.govt.nz); at
www.nzta.govt.nz/resources/research/reports/448/docs/448.pdf.

Andreas Kopp (2007), “Aggregate Productivity Effects Of Road

Investment: A Reassessment For Western Europe,” in Transport
Infrastructure Investment and Economic Productivity, ECMT Round
Tables, OECD, European Conference of Ministers of Transport
(www.oecdbookshop.org); at
www.forfas.ie/media/productivity_chapter17.pdf.

Todd Litman (2005), Evaluating Public Transit Benefits and Costs,

VTPI (www.vtpi.org); at www.vtpi.org/tranben.pdf.

Todd Litman (2010), Evaluating Transportation Economic Development

Impacts, VTPI (www.vtpi.org); at www.vtpi.org/econ_dev.pdf.

David Luskin (1999), Facts and Furphies in Benefit-Cost Analysis:

Transport, Bureau of Transport Economics (www.bitre.gov.au); at
www.bitre.gov.au/publications/24/Files/r100.pdf.

M.I. Nadri and T.P. Mamuneas (1996), Contribution of Highway Capital

to Industry and National Productivity Growth, Federal Highway
Administration (www.fhwa.dot.gov); at
www.fhwa.dot.gov/policy/nadiri2.htm.

REMI (2005), TranSight, Regional Economic Models (www.remi.com).

This input/output model evaluates the effects of transportation
improvements and activities on employment, industrial output, wages
and income, population and gross regional product.

SACTRA (1999), A Framework for Assessing Studies of the Impact of

Transport Infrastructure Projects on Economic Activity, Standing
Advisory Committee on Trunk Road Assessment, Dept. of Environment,
Transport and Regions (www.roads.detr.gov.uk); available at
www.dft.gov.uk/stellent/groups/dft_transstrat/documents/page/dft_transstrat_504940.p

Howard J. Shatz, Karin E. Kitchens, Sandra Rosenbloom and Martin

Wachs (2011), Highway Infrastructure and the Economy: Implications for
Federal Policy, RAND Corporation (www.rand.org); at
www.rand.org/pubs/monographs/MG1049.html.

Glen Weisbrod (2007), Models to Predict the Economic Development

Impact of Transportation Projects: Historical Experience and New
Applications, Annals of Regional Science, December 2007; at
www.edrgroup.com/edr1/bm%7Edoc/models-to-predict-the-eco.pdf.

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