The Economic Benefits of Public Investment in Transportation

Abstract

D o investments in transportation infrastructure provide long-term economic benefits? That question has generated an enormous research output over the past decade, mostly produced by economists. The question is of central importance to planners who must often argue for (or against) transportation infrastructure projects. This article does not provide an unambiguous answer to the question but rather reviews and summarizes the recent empirical literature that addresses the question. Given that so much of that literature has appeared in academic journals of economics, many planners have not been aware of the findings. Planners interested in the question but disinclined to wade through the econometrics so heavily employed in that literature will find this review article useful.One of the defining features of planning, as a discipline, is its explicit recognition and utilization of spatial-political boundaries within which policies are implemented. Thus, while there are many planners who are interested in aggregate geographical units such as states or the nation as a whole, there are far more who focus on local consequences of place-specific projects, namely, planners with metropolitan planning organizations (MPOs). But given that local transportation projects often depend on funds from higher levels of government (Lewis and Sprague 1997; Voith 1998), it is relevant for all planners interested in transportation to understand the nature of economic impacts of transportation at both the local and aggregate levels. The literature reviewed in this article, therefore, includes local-as well as state-and national-level studies, even while distinguishing between these different perspectives.The economic benefits of transportation improvements seem obvious when reading newspaper stories about trucks waiting two hours to cross the Peace Bridge linking Buffalo and Erie, Ontario, or of hellish conditions and dangers on former roads in the Congo where a thirty-mile journey may take more than one day by truck. But the measurement of such benefits is not obvious, nor is it easy. There are two broad classes of economic benefits that might arise as a consequence of public investment in transportation: short-run benefits and long-run benefits. Short-run benefits are the employment, earnings, and spending stimuli that spread from the construction industry to suppliers, workers, and retailers. Multipliers from input-output tables are used to estimate the industry-by-industry effects of a transportation project. This review excludes AbstractThis article reviews the recent literature on the long-term economic benefits of public investments in transportation. It organizes the literature into six groups according to the type of benefit being measured, namely, output; productivity; production costs; income, property values, employment, and real wages; rate of return; and noncommercial travel time. The central question addressed by the papers reviewed is whether public investments in transportation yield long-term economic benefits. While the...

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