While conventional methods of transport infrastructure assessment focus on benefits such as reduced travel time, improved travel reliability and a reduction in negative externalities such as noise and air pollution, they do not consider the economic (and related taxation) impacts of an investment on the wider economy. Such benefits can be substantial and have a dramatic effect on the benefit-cost ratios (BCRs) of projects and the decision on whether they should be built.
- Agglomeration Economies: When workers and firms have better access to one another there are economies of scale and scope that increase the productivity of existing workers. Agglomeration economies are why cities exist, and some of the benefits include thicker labour markets, better access to suppliers and customers, and the spillover and cross-fertilisation or knowledge and ideas.
- Move to More Productive Jobs: Transport projects can lead individuals to take on more productive and higher paying jobs by increasing the development capacity of land in areas where the most valuable jobs are located, such as the CBD, and making these locations more accessible.
- Increase Labour Force Participation: By reducing the generalised cost of travel, transport investments can cause individuals to re-enter the workforce, such as those who had previously retired or stopped working to raise children or look after family.
- Increased Output in Imperfectly Competitive Markets: When firms experience a reduction in travel time a corresponding increase in output can be expected. While firms in imperfectly competitive markets receive a benefit on each additional unit of output equalling their price-cost margin, traditional assessments of transport projects overlook this benefit while only looking at the savings in the production of these additional units.