Economic Impacts of Transportation Infrastructure

Economic Impacts of Transportation Infrastructure

The economic impacts of transportation infrastructure can be categorized as core (fundamental), operational, and geographical:

  • Capacity (core). Improving intermodal (terminals) and modal capacity through infrastructure investments is a core strategy to promote economic opportunities. An economy has a greater capacity to move passengers and freight, which conveys economies of scale and higher economic output levels.
  • Costs (core). Transport developments are commonly associated with lower unit transport costs, implying that mobility becomes more affordable. Alternatively, additional volumes can be carried at a similar cost. Overall, the share of transportation costs in the final costs of goods declines.
  • Time (operational). The economic benefits of time improvements are multidimensional. First, passengers and freight will arrive at their destinations faster, which is convenient and has an economic value. Second, time gains result in better inventory management levels and better utilization of transport assets (infrastructure, terminals, vehicles, containers, etc.).
  • Reliability (operational). Commonly involves a higher probability that a passenger or cargo unit will reach its intended destination within a scheduled timeframe and without loss, spoilage, or damage (for cargo). Reliability enables economic systems to synchronize their activities better, which, like time benefits, enables better utilization of transport assets.
  • Accessibility (geographical). The capability to access a wider market base is a common economic benefit for firms. Inputs such as raw materials, parts, energy, or labor become more readily available for an economy. At the same time, outputs such as finished goods have access to a wider market base. Greater accessibility to regional and global markets for passengers also has economic impacts linked with commercial transactions and tourism.
  • Location (geographical). An important impact of transportation concerns influencing the location of economic activities. Specific sites in proximity to modal or intermodal infrastructure are likely to generate higher value than less accessible sites. This is often referred to as the clustering effect. Thus, through location decisions involving commercial, residential, or manufacturing activities, the economic landscape is modified.

Improvements in one or more of these characteristics usually result in improvements in the competitiveness level of an area such as a region.