Transport corridors and their wider economic benefits


THE WORLD BANK | Http://Documents.Worldbank.Org/Curated/En/667501516199287820/Transport-Corridors-And-Their-Wider-Economic-Benefits-A-Critical-Review-Of-The-Literature | Updated: 18-01-2018 19:28 IST | Created: 18-01-2018 00:17 IST
Transport corridors and their wider economic benefits

Transport corridors can generate wider economic benefits and costs through their effects on a potentially diverse set of development outcomes, such as economic growth, poverty, jobs, equity, environmental quality, and economic resilience. To advance understanding of how corridors could generate wider economic benefits, this paper undertakes a quantitative review of the literature that estimates the economic benefits of large transport infrastructure projects. It conducts a meta-analysis of 234 estimated impacts found in 78 studies. It focuses on roads, rails, and waterways because transport corridors based on these modes have clearer potential for economic spillovers than, for example, airline routes.

In reviewing the literature and thinking about the wider economic impacts of transport corridors, our interest is not so much in the immediate outcomes such as savings of travel time and vehicle operating costs (VOC) that remain the focus of most cost-benefit analyses (CBA) for transport projects. Although their importance should not be dismissed and their accurate measurement remains an issue for CBA, these savings are unable to capture the full economic benefits of a transport project in anything other than a hypothetical world of perfectly competitive and complete markets (see, for example, Vickerman 2007 on this point). Rather, our interest is in the wider economic impacts of large transport projects, which include impacts on development outcomes such as economic welfare (monetary measures of well-being such as income, wages, and consumption), social inclusion (jobs, gender), equity (poverty, inequality), environmental quality (pollution and deforestation), and economic resilience (unexpected losses due to large shocks or protracted trends such as disruptive technologies). Furthermore, we are interested in the potential trade-offs that may occur between these different types of variables—for example, boosting income at the expense of rising pollution or inequality—as well as the heterogeneous impacts of transport projects on a given outcome across different places and economic agents—such as economic impacts that differ across subnational regions, industries, and segments of the population. These heterogeneities are hidden by estimates of average impacts. In some cases, they may involve only relative winners and losers. For instance, when all subnational areas along the route of a transport project gain, some may gain more than others. But, in other cases, the losses for some areas may be absolute.

The conceptual structure for the review is guided by a simple canonical model describing the policy maker's problem in maximizing the net wider economic benefits of corridors. The meta-analysis confirms that characteristics of individual studies, as well as the placement and design of the transport infrastructures systematically influence the findings of the corridor studies. It also shows that, on average, estimated impacts of corridor interventions on economic welfare and equity tend to be beneficial, while they are often detrimental for environmental quality, and possibly also for social inclusion. Because, around this average, impacts vary widely, policy makers could use complementary policies and institutions to mitigate potential trade-offs and support losers. To clarify the nature and extent of these trade-offs and varied impacts across locales and population groups, much more research is required.

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