Transport-induced Agglomeration Effects in US Metropolitan Statistical Areas SHARED ABSTRACT TEA AND PSLUT



Transport-induced Agglomeration Effects in US Metropolitan Statistical Areas SHARED ABSTRACT TEA AND PSLUT

Authors

Patricia C Melo, Imperial College

Description

There has been extensive research on the contribution of transport infrastructure and agglomeration economies to productivity levels. More recently, it has also been shown by Venables (2007) that there are productivity gains from urban transport improvements which arise through agglomeration economies. Despite this interaction between transport and agglomeration economies is widely accepted by the community of researchers interested in the productivity-agglomeration relationship, there has not been any attempt to empirically quantify this interaction.

We attempt to contribute to the literature by providing the first quantification of the indirect effect of agglomeration on productivity arising through transport infrastructure. We develop an empirical framework that allows us to estimate how much of the productivity gains from agglomeration arise through transport infrastructure.

We find positive evidence of agglomeration economies. The direct effect of doubling employment density on earnings is approximately 4.5%, while the overall effect is 3%. This value is consistent with the values reported in existing surveys of the empirical literature (e.g. Rosenthal and Strange, 2004, Melo et al., 2009), typically ranging between 3-8%.

The most interesting finding of this research is that the provision of public transport reinforces urban agglomeration economies, while road transport appears to weaken the benefits of urban agglomeration economies. This means that transport-induced agglomeration effects are positively reinforced by public transport but negatively affected by road transport. Road networks may be more important in ensuring inter-city accessibility but appear to have a negative direct effect of urban agglomeration.

Abstract

There has been extensive research on the impact of transport infrastructure, measured either in monetary or physical terms. By and large the majority of existing research has focused on the role of transport as a direct factor of production, entered directly in a production function. Previous evidence for the US on the effects of transport on economic output can be best described by the existence of mixed results, tending towards small, but statistically significant, positive effects. For an overview of the empirical literature see the survey papers by Gramlich (1994), Rietveld (1994), Boarnet (1997), Banister and Berechman (2000), de la Fuente (2000), Jiang (2001), and OECD (2002).

More recent research has focused on the relation between transport and agglomeration economies, and in particular how transport improvements influence productivity gains from agglomeration economies. The relationship between transport improvements and agglomeration economies has been formally described by Venables (2007), who showed that there are productivity gains from urban transport improvements that arise through city size. Although there is abundan research on the relation between productivity and agglomeration economies, only very few studies have attempted to account for the role of transport in this relationship.

From our review of the literature we have found only three studies that explicitly account for the role of transport on the productivity-agglomeration relationship. This is done by specifying agglomeration economies as a function of transport infrastructure. Agglomeration economies are typically represented with a market potential type measure, also called effective density, which allows for the effects of agglomeration to be realised over space and diminish with increased spatial separation. While these studies allow for a direct role of transport infrastructure in the measurement of agglomeration, they cannot inform about the extent to which agglomeration effects are reinforced or reduced through provision of different types of transport infrastructure.

In this paper we attempt to uncover the relationship between productivity, agglomeration economies and road transport and public transport infrastructure. The main objective is to quantify how much of the positive effect of agglomeration economies on productivity arise through transport infrastructure. We develop an empirical framework that allows us to uncover the indirect effect of transport supply on productivity, which emerges through an increased or reduced reach of agglomeration economies, and apply it to a balanced panel consisting of 8 years of observations for 98 large Metropolitan Statistical Areas (MSAs) in the US.

We find positive evidence of agglomeration economies. The direct effect of doubling employment density on earnings is approximately 4.5%, while the overall effect is 3%. This value is consistent with the values reported in existing surveys of the empirical literature (e.g. Rosenthal and Strange, 2004, Melo et al., 2009), typically ranging between 3-8%.

The most interesting finding of this research is that the provision of public transport reinforces urban agglomeration economies, while road transport appears to weaken the benefits of urban agglomeration economies. This means that transport-induced agglomeration effects are positively reinforced by public transport but negatively affected by road transport. Road networks may be more important in ensuring inter-city accessibility but appear to have a negative direct effect of urban agglomeration.

As for the direct effect of transport provision on spatial economy, we find that the provision of road transport can help increase productivity while the provision of public transport either has no significant impact or has a small negative impact. The direct effect of road transport infrastructure on earnings is around 0.09-0.11 while the direct effect of transit supply can be -0.03. This suggests that increasing road infrastructure by 10% corresponds to an increase on earnings of between 0.9-1.1%, while increasing transit supply by the same amount can have a negative effect of 0.3% on earnings.

On the other hand, we find that increased road transport can reduce the scope for induced urban agglomeration benefits, while increased transit supply supports stronger agglomeration benefits. This confirms the importance of public transport networks to mobility and connectivity within urban areas.

Publisher

Association for European Transport