01047171

Component

In this paper, we demonstrate how one can interpret road improvements as productivity improvements in the transportation services industry. We then translate such economic gains into a general equilibrium context in the case of the Peace Bridge at Buffalo, NY. Variables exogenous to the model are (1) measured travel time enhancements to be incurred on the improved link and (2) each industry’s value of shipments moved across it. Using this information we estimate industries’ responses to these travel time reductions in terms of direct transportation costs, inventory carrying costs, and the value of failed shipments. Extensive interviews with carriers and producers support the notion that improved travel times encourage producers to extend their market areas and, thereby, increase their production. To measure this, we recalibrate a regional input-output model for each shipping industry’s productivity improvements, add more counties to it to reflect the expanded market area, and adjust its trade coefficients commensurately. We then compare the economic contribution of the shipments to the economic area around Buffalo before and after the improvement. The principle advantage of this approach for project evaluations is that it converts the measurable change directly attributable to a transportation investment – travel time savings – into a straightforward hypothesis for change in business output, jobs, household income, and taxes. It is also industry and geographically specific. This model of individual firm response to a context specific change in travel times may suggest why it has been so difficult to capture transportation efficiencies using surrogate measures of travel time savings, such as lane miles of new highways, average speeds, construction values, and so forth – not all industries or locations within a region benefit directly from a specific transportation project investment, and change measured in a regional context may be quite small for most contemporary highway investments. Further research is needed to determine under what conditions, such as local labor force skills or availability, local land costs and taxes, and so forth, firms may be unable to expand output in response to the productivity gains from travel time savings. The disadvantage of this approach, therefore, is that it may account for the “value” of the transportation investment without measuring actual firm behavior.

01042056

07-2968

English

27p

2007

Transportation Research Board 86th Annual Meeting

CD-ROM

References (19) ; Tables (3)

Economic growth; Freight traffic; Highways; Infrastructure; Investments; Mathematical models; Productivity; Regional economics; Reliability; Transportation policy; Travel time; Trucking

Economics; Finance; Freight Transportation; Highways; Motor Carriers; Policy; Society; I10: Economics and Administration

Transportation Research Board Annual Meeting 2007 Paper #07-2968

BTRIS, TRIS, TRB

Feb 8 2007 7:41PM