Economic Effects

Transportation projects can have various impacts on a a community’s economic development objectives, such as productivity, employment, business activity, property values, investment and tax revenues (in this case "community" can range in scale from individual households to cities, regions, nations or even the entire world).

In general, transport projects that improve overall accessibility (i.e., they improve businesses ability to provide goods and services, and people's ability to access education, employment and services) and reduce transportation costs (including travel time, vehicle operating costs, road and parking facility costs, accident and pollution damages) tend to increase economic productivity and development. Care is needed to avoid double counting impacts that are already counted in travel time and vehicle cost savings, emission or safety benefits. Many economic impacts are economic transfers (one person, group or area benefits at another's expense) while others are true resource changes (overall economic productivity increases or declines). In many situations, the distribution of impacts is important; for example, from the perspective of the people who gain from an economic transfer, it is a true benefit, but not from society's overall perspective.

It is important to consider the full range of economic impacts, both positive and negative, that a transport project may cause. For example, an urban highway expansion may improve motorists' access and reduce their costs per vehicle-mile, but by creating a barrier to pedestrian travel and stimulating more dispersed land use development patterns, reduces access by other modes, and increases the total amount of travel required to reach destinations. Similarly, improving access to a particular area can expose businesses to more competition (for example, if previously captive local customers can more easily access regional shopping centers), reducing business activity there.


    • A new highway or public transport service increases a community's access to other areas. This increases businesses' labor pool, reduces their costs to obtain input materials and services, and expands their potential market. This may increase "economies of scale" in production processes, which means higher productivity through lower costs per unit of output.

    • Improved accessibility may increase workers' ability to access education and employment opportunities (increasing their productivity and incomes), and increase residents' access to more shopping opportunities (providing financial savings), and increase access to recreation and cultural opportunities (increasing their welfare).

    • Mobility management strategies, such as more efficient road pricing, can improve travel time reliability, which reduces logistics and scheduling costs beyond just the travel time savings.

    • New transportation links between cities and ports, and new types of inter-modal facilities and services at those locations, make it possible for new patterns of international trade to develop. In some cases, the new links may improve the efficiency 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 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 affect local economies. This is discussed further in the separate section on economic impact analysis.


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