New investment in roads can produce economic benefits, even in mature infrastructure networks like the UK''s, according to research by Professor Henry Overman and colleagues, to be presented at the Royal Economic Society''s annual conference at the University of Bristol in April 2017.
Their study finds that road-related accessibility improvements between 1998 and 2007 increased local employment and raised wages. Back-of-the-envelope calculations suggest that major road infrastructure in this period (of around £1.8 billion per year) generated additional jobs worth around £1 billion, in addition to all the other benefits that this investment generated in terms of improved journey times, etc.
So will road-building set the UK on the ''road to recovery''? The authors conclude: Overall, the economic benefits are relatively small. We also need to be careful in interpreting these changes as gains to the national economy. To some extent, jobs may be displaced from other areas.''
''It would also be fair to say that we provide a first estimate on the impact of new roads but a number of important puzzles remain. Given how much political attention infrastructure projects attract it''s clear that improved evaluation of new schemes is badly needed.''
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Back in 2013, the UK government unveiled ''the biggest road-building programme in 40 years'', as part of a package of infrastructure schemes intended to drive the UK''s long-term economic development. Infrastructure investment remains at the heart of government plans to build the Northern Powerhouse and rebalance the UK economy.
But what impact does infrastructure have on employment and productivity? While we have quite a lot of good evidence for developing countries, we know surprisingly little about additional investment in more mature networks.
Our research suggests that, even in mature networks, new road investment can produce economic benefits – at least locally. In the first rigorous studies to look at the effects of UK road transport improvements on employment, output and wages, we find that road-related accessibility improvements between 1998 and 2007 increased local employment and raised wages.
Back-of-the-envelope calculations suggest that major road infrastructure in this period (of around £1.8 billion per year) generated additional jobs worth around £1 billion, in addition to all the other benefits that this investment generated in terms of improved journey times, etc.
Road networks dominate transport infrastructure in most countries, including the UK. According to official transport statistics, in 2010, 91% of passenger transport and around 68% of freight transport was by road.
Road traffic has increased steadily since the 1950s, up to around 240 billion vehicle miles in 2011. And most of this traffic is concentrated in the major roads network. So it''s not surprising that a substantial amount of UK public spending is devoted to roads: around £1 billion, or 44% of total transport spending in 2010/11. An important slice of this expenditure is for new road links (since 2000, over 300km of new roads in England alone).
In theory, transport improvements decrease transport costs, improve access to markets, foster economic integration, stimulate competition, and generate agglomeration economies and a number of other ''wider'' economic benefits. This is why transport improvements are frequently proposed as a strategy for economic growth, integration and local economic development.
But for economies with well-developed transport networks like the UK, there is little good evidence on the extent of the gains that result from additions to the existing network. Although road improvements are routinely subject to appraisal – predicting the economic benefits before the roads are built – they have not historically been subject to any evaluation to work out whether these benefits actually materialised!
Our research provides some of the first hard evidence. We link data on 31 major new road construction schemes between 1998 and 2007 to administrative data on businesses and workers.
We capture the effect of new roads using an index of employment ''accessibility'' that estimates the number of workers that can reach a location, per unit of travel time, using optimal routes along the major road network. When new links are added to the network, optimal travel times decrease and employment accessibility increases, but by different amounts according to where a place is in relation to the existing road network, the new road links and major centres of employment.
To get round the fact that new roads investment is ''targeted'', we look only at places that are close to a new road scheme, estimating the effects from the subtle local changes in accessibility that occur within a 20km radius.
Linking these accessibility changes to firm-level data on employment and output allows us to estimate how transport affected local production and employment. We find substantial positive effects on area-level employment and number of plants.
In contrast, for existing firms we find negative effects on employment coupled with increases in output per worker and wages. A plausible interpretation is that new transport infrastructure attracts transport-intensive firms to an area, but with some cost to employment in existing businesses.
So will road-building set the UK on the ''road to recovery''? Overall, the economic benefits are relatively small. We also need to be careful in interpreting these changes as gains to the national economy. To some extent, jobs may be displaced from other areas. It would also be fair to say that we provide a first estimate on the impact of new roads but a number of important puzzles remain. Given how much political attention infrastructure projects attract it''s clear that improved evaluation of new schemes is badly needed.
