Defining Economic Impact and Benefit Metrics from Multiple Perspectives:

Lessons from Both Sides of the Atlantic

European Transport ConferenceGlasgow, 11 October, 2011

Glen Weisbrod Economic Development Research Group

Boston, MA, USA

David SimmondsDavid Simmonds Consultancy

Cambridge, England

Why US-UK Comparison ? 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

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Issue UK USFunding Decisions Largely National Mostly State & RegionalOfficial Guidance WebTAG, Scot-TAG none (many general guidance

docs)Appraisal CBA and Appraisal

TableVaries widely…Federal: forms of BCAStates: BCA, MCA, Composite Ratings

Evolution of Methods

National methods updated

Experimentation & innovation

Perspective General relationships, elasticities specified

“Ground level” –spatial/industry diff., elasticities vary

Productivity Elements

Labour Mkt agglomeration

Labor, Freight, Gateway Access Mkts

MCA= Multi-Criteria Analysis

Topics

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

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Different Metrics & Motivations

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)

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Regenerate Target Areas

Support Key

Industries

Return on Investment

Value for Money

Enhance Competitive

ness

Metric Motivation

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Case Example: Intermodal Freight Facility

• 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

Productivity & WEBsKrugman (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”

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Same Day Delivery Market – Portland , OR (3 hr. trip)

US Auto Parts Supply Chain Corridors

Labour Market - Chicago(40 min commute area)

Case Examples: Market Access (US)

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Intermodal Rail Markets

Intl. PortMarkets

Same Day Delivery Mkts

Completing the Appalachian Development Highway System (cross-mountain connectors): Areas with Change in Gateway Market Access

LabourMarkets

Int. Air Gateway Markets

US National Average

Local Pop Market

Same-DayDelivery Market

Airport Rail Terminal

Marine Port Border Intl. Gateway

Local Pop Market 1 0.64 0.62 -0.64 -0.57 -0.07 -0.5Delivery Market 0.63 1 0.39 -0.50 -0.59 -0.02 -0.57Airport 0.62 0.39 1 -0.53 -0.42 -0.10 -0.36Rail Terminal -0.65 -0.52 -0.53 1 0.49 0.08 0.41Marine Port -0.57 -0.59 -0.42 0.49 1 0.06 0.49Border -0.07 -0.02 -0.10 0.08 0.06 1 0.09Intl. Air Gateway -0.50 -0.57 -0.36 0.41 0.49 0.09 1

Case Example: Productivity & Market Scale (US)

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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 marketsSame-day drive market and airport

access have the strongest incremental impact on this industry, esp. in medium size markets.

Appraisal & Prioritisation

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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 – productivi

ty

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

Case Example: Economic Factors in Appraisal

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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

CBA MCA Rating Appraisal Rating Criteria USDOT OH WI MO KS DfT Scot Traveller Benefit and Environment Efficiency: Travel time, cost, level of service X X X X X X X Safety (accident rate) X X X - X X X Pollution emissions/air quality/greenhouse gas X X X X - X X

Transportation Drivers of Business Productivity

Intermodal facilities, access & interchange (x) X (a) X (a) X X Reduce localized congestion bottlenecks (x) X X X X (b) (b) Connectivity to key corridors or global gateways (x) - X X (a) - - Labour market access (x) - (a) - (a) (a) (a) Reliability of travel times (x) - (a) - (a) X (b) Truck freight route, supply chain impact (x) X (a) X X - - Localized Outcomes Location: regeneration of distressed area - X - X - X X Land use: supports cluster or in-fill development - X - X X X X Econ Policy: support target industry growth - - - X X - - Local public support - - X - X - - Leveraging private investment - X - - - - -

Macroeconomic Outcomes

Productivity X - - - - X X Jobs(support job growth/reduce unemployment) - X X - - - - Gross Regional Product or Value Added - - - - X - -

Spatial Scales & Access Factors

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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)

Planning & Decision-making:moving forward or backward?

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.

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Thank you

Glen Weisbrod

gweisbrod@edrgroup.com

David Simmonds

david.simmonds@davidsimmonds.com

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