This paper is concerned with the links between agglomeration, productivity and transport
investment. If improvements in transport systems give rise to changes in the mass of economic activity
accessible to firms, for instance by reducing travel times or the costs of travel, then they can induce
positive benefits via agglomeration economies. The paper presents empirical results from an
econometric analysis of the relationship between productivity and accessibility to economic activity
for different sectors of the UK economy. The results show that agglomeration economies do exist and
that they can be substantial, particularly for services. Furthermore, the effect of agglomeration
externalities is not trivial when considered in the context of transport appraisal. Initial calculations
typically indicate additions to conventional user benefits of 10%-20% arising from increasing returns
to economic mass.
