Transcript Defining Economic Impact and Benefit Metrics

Glen Weisbrod
David Simmonds
Economic Development Research Group
Boston, MA, USA
David Simmonds Consultancy
Cambridge, England
European Transport Conference
Glasgow, 11 October, 2011
Different approaches to evaluation / appraisal
 Different roles for various levels of government
 Yet same metrics & concepts, though applied differently
 Universality of lessons drawn, applicable elsewhere

Issue
UK
US
Funding Decisions
Largely National
Mostly State & Regional
Official Guidance
WebTAG, Scot-TAG
none (many general guidance docs)
Appraisal
CBA and Appraisal Table
Varies widely…Federal: forms of BCA
States: BCA, MCA, Composite Ratings
Evolution of Methods
National methods updated
Experimentation & innovation
Perspective
General relationships,
elasticities specified
“Ground level” –spatial/industry diff.,
elasticities vary
Productivity Elements
Labour Mkt agglomeration
Labor, Freight, Gateway Access Mkts
2
MCA= Multi-Criteria Analysis
1.
Different Metrics and Motivations
2.
Productivity & Wider Economic Benefits
3.
Inclusion in Appraisal & Prioritisation
4.
Incorporating Spatial Scales & Access Factors
5.
Implications for Planning & Decision-making
3
Metric
A.
Economic Impact - money flow in
economy, change in jobs and GVP or
GDP (in a specified area)
B.
Economic Benefit - welfare gain,
money + non-money benefits
(“willingness to pay”) for CBA
C.
Productivity Benefit - growth in VA
per worker or investment unit, due to
WEB … (welfare gain and economic
impact net of spatial redistribution)
4
Motivation
Support Key
Industries
Regenerate
Target Areas
Enhance
Competitiveness
Value for
Money
Return on
Investment
Motivation
• Project Goals (PPP)
• Open intermodal truck/rail container yard
• Public improvement of truck routes
• Private improvement of freight rail infrastructure
• Adjacent industrial development
• Economic Goals
• Reduce costs & competitiveness for area manufacturers
(via enhanced efficiency & market access/scale)
• Expand warehouse/distribution activities
• Attract manufacturing with high paying jobs
• Public return on use of public funds
5
Krugman (1995) concept of agglomeration economies as
disproportionate concentrations of specific industries at specific
locations, enabled by access to wider markets, including:
 Labour markets: “commuting”
 Intermediate markets: “supply chains”
 Final demand markets: “delivery”
Labour Market - Chicago
(40 min commute area)
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US Auto Parts
Supply Chain Corridors
Same Day Delivery Market
– Portland , OR (3 hr. trip)
Completing the Appalachian Development Highway System (crossmountain connectors): Areas with Change in Gateway Market Access
Int. Air Gateway
Markets
US National
Average
Local Pop Market
Delivery Market
Airport
Rail Terminal
Marine Port
Border
Intl. Air Gateway
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Intermodal
Rail Markets
Local Pop
Market
1
0.63
0.62
-0.65
-0.57
-0.07
-0.50
Same-Day
Delivery Market
0.64
1
0.39
-0.52
-0.59
-0.02
-0.57
Intl. Port
Markets
Airport
0.62
0.39
1
-0.53
-0.42
-0.10
-0.36
Rail
Terminal
-0.64
-0.50
-0.53
1
0.49
0.08
0.41
Labour
Markets
Same Day
Delivery Mkts
Marine Port
Border
-0.57
-0.59
-0.42
0.49
1
0.06
0.49
-0.07
-0.02
-0.10
0.08
0.06
1
0.09
Intl.
Gateway
-0.5
-0.57
-0.36
0.41
0.49
0.09
1
For Trans Equip Mfg…

Access to truck delivery markets has
largest impact on productivity, esp. in
medium and large business markets

Access to labour & airport markets
have smaller but constant impacts on
productivity
For tourism industry…

Increasing productivity with access to
larger population markets

Same-day drive market and airport
access have the strongest
incremental impact on this industry,
esp. in medium size markets.
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Transport Drivers
of WEB –
reliability, market
access, intermodal connectivity
Non-User
Econ Effect
–
productivity
Wider Outcomes:
CBA (incl. productivity)
Macro-Econ (jobs, GRP, GVA)
Local Outcomes:
Regeneration, Land Devel,
Industry Growth Targets,
Private Investment
Economic Considerations
 UK –WEB productivity in CBA, Local Outcomes in Appraisal
Table
 US DOT– CBA allows for WEB productivity, local outcomes in
qualitative considerations
 US States – most recognize drivers of WEBs and local
outcomes in MCA; others model WEB productivity for scoring
points or macro-econ outcomes
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Rating Criteria
Traveller Benefit and Environment
Efficiency: Travel time, cost, level of service
Safety (accident rate)
Pollution emissions/air quality/greenhouse gas
Transportation Drivers of Business Productivity
Intermodal facilities, access & interchange
Reduce localized congestion bottlenecks
Connectivity to key corridors or global gateways
Labour market access
Reliability of travel times
Truck freight route, supply chain impact
Localized Outcomes
Location: regeneration of distressed area
Land use: supports cluster or in-fill development
Econ Policy: support target industry growth
Local public support
Leveraging private investment
Macroeconomic Outcomes
Productivity
Jobs(support job growth/reduce unemployment)
Gross Regional Product or Value Added
10
CBA
MCA
Rating Appraisal
USDOT OH WI MO
KS
DfT Scot
X
X
X
X
X
X
X
X
X
X
X
X
X
-
X
X
X
X
X
X
(x)
(x)
(x)
(x)
(x)
(x)
X
X
X
(a)
X
X
(a)
(a)
(a)
X
X
X
X
(a)
X
(a)
(a)
(a)
X
X
(b)
(a)
X
-
X
(b)
(a)
(b)
-
-
X
X
X
X
-
X
X
X
-
X
X
X
-
X
X
-
X
X
-
X
-
X
-
X
-
-
X
X
-
X
-
X = factor explicitly included as an element of the rating system;
(x) = factor implicitly allowed via calculation of additional productivity benefit in CBA
(a) = factor implicitly included as a component of the macroeconomic productivity calculation
(using TREDIS in US and agglomeration benefit guidance for DfT and Transport Scotland);
(b) = factor included in travel efficiency benefit shown above
“ - ” = factor not formally recognized as a separate element of the rating system, but may
still be considered through other elements of the project appraisal and selection process

Scale: Macro (national), Meso (region, metropolitan),
Micro (neighborhood)

Error propagated by assuming housing and labor markets
respond similarly (towards equilibrium) at all spatial scales

Error propagated by assuming national transport investment
impacts (on industry-wide technology, labor intensity and wage
rates) transfer similarly to single project impacts.

Increasing market access (and raising effective density) should
be reconciled with travel models (forecasts of induced VKT) and
land use models (scenarios for business location and clustering)
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
Value to generalised agglomeration factors, but sometimes also
value to recognizing productivity differences by mode, spatial
scale, element of the economy

Useful to identify local/regional as well as national effects on
productivity & competitiveness

Value in analysing effects on gross value added as well as
net productivity

Same types of models may not be equally appropriate for policy,
planning, prioritisation, and project design alternatives analysis.
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Glen Weisbrod
[email protected]
David Simmonds
[email protected]
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