Direct Incorporation & Transport Costs in Regional Economic and Transport Modelling in Europe



Direct Incorporation & Transport Costs in Regional Economic and Transport Modelling in Europe

Authors

WILLIAMS I and JIN Y, Marcial Echenique and Partners, UK

Description

A central task in regional economic and transport modelling is to estimate the impact of changes in transport upon spatial distribution of economic activities. An analysis of this type, by definition, needs two main ingredients: first, a transport model w

Abstract

A central task in regional economic and transport modelling is to estimate the impact of changes in transport upon spatial distribution of economic activities. An analysis of this type, by definition, needs two main ingredients: first, a transport model which calculates the monetary cost, travel time and various indicators of service quality for each type of travel between each pair of origin and destination under each scenario, and secondly a regional economic model which represents the locational response of firms and households to the spatial impedance. A two-way link is usually established between the two model components: the cost, time and quality of service indicators obtained from the transport component are used by the regional economic component to estimate the demand and supply of firms and households (in their dual role of labour and consumer) in space; in the opposite direction, the pattern of spatial supply and demand relationships are converted into demand for passenger and freight transport for a given period (e.g. commuters during the morning peak, daily or weekly goods deliveries, or port throughput in a year) for use in the transport component. For this type of exercise often complex models are used (Willianas et al, 1978; Wilson et al 1981), though simple, conceptual models are also shown to be effective (e.g. Krugman, 1995). In the process the cost of transport, and the way in which cost is set up to influence location of activities, play a critical role. Transport costs are also central to policy and project evaluation in land use and transport studies.

This paper examines in some detail the ways in which transport costs are conventionally treated in such models, and considers further options in modelling that may help to gauge more correctly the impact of transport improvements, specifically in the European context of today.

Throughout we use the term transport cost to mean monetary cost that are incurred by a firm or a household that is related to their use of transport. The term cost in transport is often associated with two other related concepts: the first is generalised cost (or disutility), a composite sum of monetary cost, time and service quality that are associated with passenger and freight movements; the second is operating cost of firms that provide transport services. The relationships among the three are discussed in some detail below.

The aim of this paper is to propose a framework in which the transport cost structures are better understood, and the monetary costs related to transport are taken account as tully as possible, in order to represent more accurately the behaviour of the user and facilitate better economic evaluation. This involves essentially the treatment of direct and indirect transport costs. In the course of the following analysis it will become apparent that a thorough understanding of logistics operations and business management is critical. On the other hand, models will help to piece together an overall picture of the cost impact, once such knowledge of direct and indirect transport costs is incorporated in the implementation. Direct and indirect transport costs are no alien to transport analysis and modelling. For example, the cost implications of time and service quality elements of metropolitan passenger travel are in general well understood. However, the understanding and representation of freight transport costs are a lot less satisfactory.

This is mainly because in conventional modelling, transport is represented independent of the remainder of the logistics operation. Usually only the line haul and transhipment costs are included in modelling; in some instances terminal handling and value of goods in transit are considered. Yet the connection of transport to warehouse distribution and production/supply management is so far largely ignored in strategic modelling. At a more detailed level, there is a considerable body of literature and documentation of the direct and indirect costs of freight transport, and the task appears to be one of making use of them in modelling.

Business passenger travel appears to be a rather different issue. In metropolitan modelling in course of business trips are often modelled in a way analogous to personal travel. However, the relationship between industrial activity and business travel is yet very much a topic under study, and a large number of issues are in need of clarification. A recent survey shows that even a considerable number of manufacturing and service sector company themselves, which spend a fair share in course of business travel, do not monitor effectively these costs (Ernst & Young, 1906, p5 and p7). Here the issue is mainly to do with develop a better understanding of the business travel demand

The issues seem to be most acute with medium to long distance interregional transport, which is growing at a considerably higher rate than shorter distance movements in Europe. This paper will focus on issues in this area. Also, the discussion below will concentrate on freight and business passenger travel, whilst leaving medium to long distance personal passenger travel to a separate analysis.

Publisher

Association for European Transport