Title: Cost-benefit analysis of transport investments in distorted economies
Authors: Calthrop, Edward
De Borger, Bruno
Proost, Stef
Issue Date: Jun-2008
Publisher: K.U.Leuven, Faculty of Economics and Applied Economics : Department of Economics
Series Title: CES - Discussion paper series (DPS) 08.18 pages:1-43
Abstract: This paper deals with costs-benefit analysis of investment in transport infrastructure. Its contribution is twofold. Firstly, we develop a general equilibrium model to explore the impact of a small budgetary-neutral investment in transport infrastructure in a second-best setting, where other markets in the economy are distorted by taxes or external costs. The model incorporates different transport modes that are used both for intermediate inputs (freight) and for final consumption (passenger travel). An intuitive operational expression for the net economic benefit of an investment is derived that depends on the way the investment is financed. This expression generalizes recent findings in the literature. Secondly, we illustrate the results numerically using a small example. Our findings show that both the specific financing instrument used and the labour market consequences may have large implications for the net benefits of transport investments. Significant errors may be made in limiting cost-benefit analysis to transport markets only.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Research Center of Energy, Transport and Environment, Leuven

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