Transport

Transport can have a positive impact on the local economy, although the role of transport in stimulating growth is not as clear-cut as assumed by many decision makers.

Evidence review

Summary

The review considered more than 2,300 policy evaluations and evidence reviews from the UK and other OECD countries. It found 29 impact evaluations that met the Centre’s minimum standards.

Overall, the impact of transport investment on employment is mixed (for road) or unknown (for rail, bus, tram, and cycling). However, there are good reasons to invest in transport infrastructure beyond the impact on local growth .

Many of these findings depend on a small number of studies. They are, however, consistent with other research on the economic impact of transport improvements.

What the Evidence Showed

  • Road projects can positively impact local employment. But effects are not always positive and a majority of evaluations show no (or mixed) effects on employment
  • Road projects may increase firm entry (either through new firms starting up, or existing firms relocating). However, this does not necessarily increase the overall number of businesses (since new arrivals may displace existing firms).
  • Road projects tend to have a positive effect on property prices, although effects depend on distance to the project (and the effects can also vary over time).
  • The impact of roads projects on the size of the local population may vary depending on whether the project is urban, suburban or rural.
  • There is some evidence that road projects have positive effects on wages or incomes.
  • There is some evidence that road projects have a positive effect on productivity.
  • Rail projects tend to have a positive effect on property prices, although effects depend on distance to the project (and the effects can also vary over time).

Where there was lack of evidence

  • We found no high quality evaluations that provide evidence on the impact of rail infrastructure on employment, and only a limited number of evaluations showing that road projects have a positive effect.
  • We found no high quality evaluations that provide evidence on the impacts of trams, buses, cycling and walking schemes on any economic outcomes.
  • Even when studies are able to identify a positive impact on employment, the extent to which this is as a result of displacement from other nearby locations is still unresolved. More generally, the spatial scale of any employment effects varies and we do not have enough evidence to be able to generalise about the spatial distribution of effects if they occur. The same is true for other outcomes. The scale at which the studies evaluate impact varies from adjacent neighbourhoods to much larger US counties.
  • Surprisingly, very few evaluations consider the impact of transport investment on productivity (we found just three studies, two for roads and one for rail). Although the use of such productivity effects to calculate ‘wider economic benefits’ in transport appraisal is underpinned by a larger evidence base, it is still worrying that so few evaluations can demonstrate that these effects occur in practice.
  • We have little evidence that would allow us to draw conclusions on whether large-scale projects (e.g. high speed rail or motorway construction) have larger economic growth impacts than spending similar amounts on a collection of small-scale projects (e.g. light rail or junction improvements).
  • More generally, we do not know how differences in the nature of improvements (e.g. journey time saved or number of additional journeys) affect local economic outcomes.
  • There is some evidence that context matters. For example, property price effects may depend on the type of property, while wage effects may differ between low skilled and high skilled workers. But, once again we do not have enough evidence to be able to generalise.

Lessons

  • The economic benefits of transport infrastructure spending – particularly as a mechanism for generating local economic growth – are not as clear-cut as they might seem on face value.
  • Arguments for spending more in areas that are less economically successful hinge on the hope that new transport is a cost-effective way to stimulate new economic activity. We do not yet have clear and definitive evidence to support that claim.
  • Our findings raise fundamental questions about scheme appraisal and prioritisation, and about the role of impact evaluation in improving decision-making around transport investment.

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