European Transport Conference Glasgow, 11 October, 2011 Glen Weisbrod Economic Development Research Group Boston, MA, USA David Simmonds David Simmonds Consultancy Cambridge, England

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 2 IssueUKUS Funding DecisionsLargely NationalMostly State & Regional Official GuidanceWebTAG, Scot-TAGnone (many general guidance docs) AppraisalCBA and Appraisal TableVaries widely…Federal: forms of BCA States: BCA, MCA, Composite Ratings Evolution of MethodsNational methods updatedExperimentation & innovation PerspectiveGeneral relationships, elasticities specified “Ground level” –spatial/industry diff., elasticities vary Productivity ElementsLabour Mkt agglomerationLabor, Freight, Gateway Access Mkts 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

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 Regenerate Target Areas Support Key Industries Return on Investment Value for Money Enhance Competitiveness Metric Motivation

5 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

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” 6 Same Day Delivery Market – Portland, OR (3 hr. trip) US Auto Parts Supply Chain Corridors Labour Market - Chicago (40 min commute area)

7 Intermodal Rail Markets Intl. Port Markets Same Day Delivery Mkts Completing the Appalachian Development Highway System (cross- mountain connectors): Areas with Change in Gateway Market Access Labour Markets Int. Air Gateway Markets US National Average Local Pop Market Same-Day Delivery Market Airport Rail Terminal Marine PortBorder Intl. Gateway Local Pop Market Delivery Market Airport Rail Terminal Marine Port Border Intl. Air Gateway

8 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.

9 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 – productivity Wider Outcomes: CBA (incl. productivity) Macro-Econ (jobs, GRP, GVA ) Local Outcomes: Regeneration, Land Devel, Industry Growth Targets, Private Investment

10 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

11 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)

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. 12

Glen Weisbrod David Simmonds 13