Transport connects people, places and cities. Investment in transport infrastructure therefore helps bridging economic and social divides. It promotes economic growth and catching up of regions by providing access to jobs for workers and markets for firms. This report summarises evidence on the benefits of transport investment for economic growth and job creation and thereby for catching up in OECD regions. Beyond economic divides, the report consider inequality in access to opportunities using the EC-ITF-OECD Urban Access Framework. It considers how transport can bridge social divides by taking a closer look at accessibility within OECD cities (functional urban areas). Cities differ greatly in their ability to provide inclusive access to opportunities across more affluent and poorer neighbourhoods. To bridge divides, the report highlights the need to go beyond transport infrastructure investment and consider wider urban planning, as well as complementary measures in regions.
Transport Bridging Divides
Abstract
Executive Summary
Transport infrastructure connects businesses, people and places. It provides firms with access to markets, workers with access to jobs and cities and regions with access to the global economy. Transport infrastructure has been a necessary condition for economic development for centuries and remains an important factor in the catching up of economically weaker regions. Public investment reflects its importance. In many OECD member countries, total inland transport infrastructure investment, i.e. investment in road and rail, amounts to more than 1% of gross domestic product (GDP), not even accounting for maintenance spending for the existing stock.
Transport bridging economic divides
Improving transport networks yield both an immediate as well as a delayed economic dividend for regions. Through better integration into the wider transport network, regions immediately gain greater accessibility, i.e. greater market access. For incumbent firms this means that they can reach more consumers for the same cost of transport, thereby increasing their potential customer or client base. Such an increase in their market allows firms to scale up production and leverage efficiency gains. Areas with better accessibility provide stronger incentives for new and existing firms to locate there. Better access means firms can take advantage of the cheaper cost of land and rent, without foregoing a suitably deep pool of workers. A delayed dividend accrues over time. As other regions grow, the market that can be reached from a connected region increases as well. Both dividends matter in practice. For access to people (population in regions), two-thirds of the improvements in European regions between 1990 and 2012 came from the construction of new highways, and one-third from population growth in already connected regions. For GDP, a more dynamic factor, new highways contributed only 20% of market access improvements, while growth in already connected regions contributed 80%.
Economic benefits from greater accessibility are sizeable for all types of regions. A 10% improvement in market access increases GDP in a region by 2%, on average. To put this into perspective, market access in the French Haute-Garonne region and its main city Toulouse increased by 40% between 1990 and 2012, resulting in an 8% increase in GDP. There are, however, limits to economic gains that transport infrastructure can provide as today’s well‑developed highway network provides a high degree of accessibility in many parts of continental Europe. Nevertheless, there are still places, where benefits from improvements in accessibility can be substantial, especially in Eastern Europe.
Transport investment cannot bridge all regional divides. Transport infrastructure investment may amplify or create differences in the economic trajectory of regions. A study for Spain, for example, finds that after the opening of a new motorway, municipalities within 10 km had, on average, more than 13 percentage points higher firm creation rates than those 10‑20 km away. Investment decisions therefore entail important choices in terms of location, path and timing of construction of new infrastructures. Decisions should be taken after careful deliberation of the potential local and aggregate gains and losses, using careful cost‑benefit analyses in line with best practices in the OECD.
Transport bridging urban divides
Accessibility improvements in urban transport raise productivity and wages but also housing costs. Firms and workers in larger cities are more productive due to “agglomeration benefits”, i.e. economic gains related to density. These benefits arise in large part through more opportunities for formal and informal interaction and learning for people, including a greater variety of jobs that match workers’ skills. The results are higher wages for workers but also higher housing costs as neighbourhoods with greater access are coveted by an increasing number of people. At the same time, residents in each neighbourhood can only access a limited number of opportunities at reasonable travel distance. For residents living outside the city centre the number of opportunities is often much more limited compared to the total opportunities in the metropolitan area. Accessibility depends on the speed and efficiency of the transport system but also on how far people have to travel to reach their destination. To boost accessibility a city has therefore two options: it can target improvements in the performance of a particular transport mode or bring its population and their destinations closer together, for example by providing more opportunities where people live.
Larger cities offer residents access to more opportunities but those living in the commuting zone generally require a car. Within a 30‑minute ride using public transport, residents in Europe’s larger metropolitan areas (more than 2 million inhabitants) can access about 3 times as many shops – taken as a proxy of access to opportunities – as residents in Europe’s smaller metropolitan areas (400 000 to 750 000 inhabitants). Public transport provides access within the city centre itself, while residents of the commuting zone typically have to rely on their car to reach a sizeable variety of shops. Even when travelling by car, the degree of access differs between the commuting zone and the city centre. In the metropolitan area of Rome, Italy’s capital city, the average resident living in the commuting zone can reach about 390 shops by driving 30 minutes. In comparison, a resident of Rome’s dense urban centre can reach more than 2 400 shops by car and more than 1 500 shops within 30 minutes using public transport.
Transport investment needs complementary policies to be effective at improving accessibility for everyone. In large metropolitan areas, better accessibility is to a significant extent driven by greater proximity (i.e. shorter distances) to opportunities. Greater density reduces travel times, with the latter making for more attractive cities. For metropolitan areas with fewer than 750 000 inhabitants, however, proximity matters less than the efficiency of the transport system in providing access to opportunities. Investment to improve the efficiency of the transport system can raise accessibility in a neighbourhood but is unlikely to translate into better accessibility for low-income residents without additional measures. Even if investment targets less affluent neighbourhoods, prices for housing and rents in those neighbourhoods will rise alongside accessibility improvements. Complementary policies such as increased housing supply through the densification around transport links or dedicated affordable housing can alleviate these cost pressures. Additional policies can focus on bringing opportunities to people living in low-income neighbourhoods by favouring mixed land-use to increase the proximity between people and opportunities.
Transport moving regions and cities forward
Ageing, the transition towards climate‑neutral economies, the sharing economy and not least the current COVID-19 pandemic require rethinking the future of transport. An important trend was the gradual shift in investment priorities from road to less carbon‑emitting rail, with inland infrastructure investment dedicated to rail increasing from 28% in 2000 to 31% in 2016 across OECD member countries. COVID‑19 has driven people back into their cars. Rebuilding engagement with public transport will thus be crucial in the months to come. There are also opportunities arising from the pandemic, particularly in cities. At least 150 cities around the world have created temporary bicycle lanes and other spaces for active transport, taking back roads from cars.