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.

When individuals and businesses choose to travel it is generally not for the sake of travel itself, as the need to travel is derived from the purpose of the trip, whether it is to go to work, make a delivery or meet a client. Transport infrastructure investments can effectively bring people and firms closer together by reducing the time it takes to traverse a network. They also have the potential to physically bring people and firms closer together by impacting the land use outcomes and development potential activated by projects. In these terms, transport projects can have massive city shaping benefits that go far beyond the traditional benefits quantified in assessments. These Wider Economic Benefits include:
  • 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.
LUTI Consulting, by way of its experience and expertise in urban and transport economies, spatial analysis and understanding of land market interactions with transport projects can help quantify these Wider Economic Benefits for clients.