Transport and Economic Growth

Abstract

There is a perceived wisdom that transport provision (especially of roads) is an essential pre-requisite for economic growth which has tended to justify a “predict and provide“ approach to the provision of roads. The evidence is much more mixed, GDP growth has been a good predictor of both passenger and freight growth, at least until recently, leading to speculation that there might be an optimum “transport intensity” of the economy. This has become a potential objective for sustainable transport policies to try and reduce transport intensity, i.e. seek ways of reducing the amount of transport which is necessary to sustain a given level of GDP. There remain, however, many instances of where specific provision has not led to the economic growth which was confidently expected, despite traffic growth which exceeded forecast levels. How should governments and other providers respond to this situation, and in particular should they, and if so how, introduce better measurement of the wider economic effects of transport improvements into investment appraisal? How do these effects relate to other external effects of transport, for example, on the environment? This paper will report on an approach to these issues based on a recent report on Transport and the Economy by the U.K. Standing Advisory Committee on Trunk Road Assessment (of which the author was a member). The key points which this Report brings out are the lack of any general solution to the issue, the importance of considering the extent of imperfect competition in the sectors using transport, the importance of distinguishing the redistributive effects from the net impacts and the incidence of the “two-way road” effect where transport improvements sought by a region may work against its best interests, and the need to demonstrate clearly the relationship between the wider economic and environmental impacts of any proposal.