The Broader Benefits of Transportation Infrastructure

Assessments of the economic benefits of transportation infrastructure investments are critical to goodpolicy decisions. At present, most such assessments are based of two types of studies: micro-scale studiesin the form of cost-benefit analysis (CBA) and macro-scale studies in the form of national or regionaleconometric analysis. While the former type takes a partial equilibrium perspective and may thereforemiss broader economic benefits, the latter type is too widely focused to provide much guidanceconcerning specific infrastructure projects or programs. Intermediate (meso-scale) analytical frameworks,which are both specific with respect to the infrastructure improvement in question and comprehensive interms of the range of economic impacts they represent, are needed. This paper contributes to thedevelopment of meso-scale analysis via the specification of a computable general equilibrium (CGE)model that can assess the broad economic impact of improvements in transportation infrastructurenetworks. The model builds on recent CGE formulations that seek to capture the productivity penalty onfirms and the utility penalty on households imposed by congestion (Meyers and Proost, 1997 Conrad,1997) and others that model congestion via the device of explicit household time budgets (Parry andBento, 2001, 2002). The centerpiece of our approach is a representation of the process through whichmarkets for non-transport commodities and labor create derived demands for freight, shopping andcommuting trips. Congestion, which arises due to a mismatch between the derived demand for trips andinfrastructure capacity, is modeled as increased travel time along individual network links. Increasedtravel time impinges on the time budgets of households and reduces the ability of transportation servicefirms to provide trips using given levels of inputs. These effects translate into changes in productivity,labor supply, prices and income. A complete algebraic specification of the model is provided, along withdetails of implementation and a discussion of data resources needed for model calibration and applicationin policy analysis.