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Defining Economic Impact and Benefit Metrics from Multiple Perspectives:
Lessons from Both Sides of the Atlantic
European Transport ConferenceGlasgow, 11 October, 2011
Glen Weisbrod Economic Development Research Group
Boston, MA, USA
David SimmondsDavid Simmonds Consultancy
Cambridge, England
Why US-UK Comparison ? 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
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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 BCAStates: 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
MCA= Multi-Criteria Analysis
Topics
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
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Different Metrics & Motivations
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)
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Regenerate Target Areas
Support Key
Industries
Return on Investment
Value for Money
Enhance Competitive
ness
Metric Motivation
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Case Example: Intermodal Freight Facility
• 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
Motivation
Productivity & WEBs
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”
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Same Day Delivery Market – Portland , OR (3 hr. trip)
US Auto Parts Supply Chain Corridors
Labour Market - Chicago(40 min commute area)
Case Examples: Market Access (US)
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Intermodal Rail Markets
Intl. PortMarkets
Same Day Delivery Mkts
Completing the Appalachian Development Highway System (cross-mountain connectors): Areas with Change in Gateway Market Access
LabourMarkets
Int. Air Gateway Markets
US National Average
Local Pop Market
Same-DayDelivery Market
Airport Rail Terminal
Marine Port Border Intl. Gateway
Local Pop Market 1 0.64 0.62 -0.64 -0.57 -0.07 -0.5Delivery Market 0.63 1 0.39 -0.50 -0.59 -0.02 -0.57Airport 0.62 0.39 1 -0.53 -0.42 -0.10 -0.36Rail Terminal -0.65 -0.52 -0.53 1 0.49 0.08 0.41Marine Port -0.57 -0.59 -0.42 0.49 1 0.06 0.49Border -0.07 -0.02 -0.10 0.08 0.06 1 0.09Intl. Air Gateway -0.50 -0.57 -0.36 0.41 0.49 0.09 1
Case Example: Productivity & Market Scale (US)
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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.
Appraisal & Prioritisation
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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
Transport Drivers of
WEB – reliability,
market access, inter-modal connectivity
Non-User Econ
Effect – productivi
ty
Wider Outcomes: CBA (incl. productivity)Macro-Econ (jobs, GRP, GVA)Local Outcomes: Regeneration, Land Devel, Industry Growth Targets, Private Investment
Case Example: Economic Factors in Appraisal
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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
CBA MCA Rating Appraisal Rating Criteria USDOT OH WI MO KS DfT Scot
Traveller Benefit and Environment
Efficiency: Travel time, cost, level of service X X X X X X X Safety (accident rate) X X X - X X X Pollution emissions/air quality/greenhouse gas X X X X - X X
Transportation Drivers of Business Productivity
Intermodal facilities, access & interchange (x) X (a) X (a) X X Reduce localized congestion bottlenecks (x) X X X X (b) (b) Connectivity to key corridors or global gateways (x) - X X (a) - - Labour market access (x) - (a) - (a) (a) (a) Reliability of travel times (x) - (a) - (a) X (b) Truck freight route, supply chain impact (x) X (a) X X - -
Localized Outcomes
Location: regeneration of distressed area - X - X - X X Land use: supports cluster or in-fill development - X - X X X X Econ Policy: support target industry growth - - - X X - - Local public support - - X - X - - Leveraging private investment - X - - - - -
Macroeconomic Outcomes
Productivity X - - - - X X Jobs(support job growth/reduce unemployment) - X X - - - - Gross Regional Product or Value Added - - - - X - -
Spatial Scales & Access Factors
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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)
Planning & Decision-making:moving forward or backward?
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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