ECONOMIC DEVELOPMENT QUARTERLY
Generally, a project will deliver savings in these cost areas and these are the main benefits to road users. In addition to these direct costs and benefits there are potential costs and benefits to external parties termed‘ externalities’. Externalities that are often included in a transport project CBA include:
• Air pollution;
• Greenhouse gas emissions;
• Noise;
• Water;
• Nature and landscape impacts;
• Urban separation; and
• Downstream effects.
A number of manuals provide guidance on monetising these costs and benefits( for example: Austroads( 2014), Updating Environmental Externalities Unit Values).
It is often argued that there are benefits of road projects that are seldom given sufficient weight, such as benefits that flow from greater choice in access to housing and to jobs and recreational opportunities. But it can be argued that these are to a large extent captured in the travel cost savings that are a measure of‘ willingness to pay’ for the new road or road upgrade.
EVALUATING WIDER ECONOMIC BENEFITS( WEBS)
To capture the true value that a major road infrastructure investment will have for a regional economy and community, it is necessary to consider the wider economic benefits( WEBs). Examples of WEBs include:( 1) benefits to firms; and( 2) benefits to consumers. in an economy to produce a given level of output. Productivity is considered a key source of economic growth and competitiveness, and one of the most widely used measures of productivity is Gross Domestic Product( GDP), or at the regional level, Gross Regional Product( GRP) per hour worked. To take account of the role of capital inputs, a measure is the flow of productive services that can be drawn from the cumulative stock of past investments( such as machinery and equipment).
After computing the contributions of labour and capital to output, the so-called‘ multi-factor productivity’( MFP) effect can be derived. MFP measures the residual growth that cannot be explained by the rate of change in the services of labour, capital and intermediate outputs, and is often interpreted as the contribution to economic growth made by factors such as technical and organisational innovation.
When a road in a regional or remote area is built, or upgraded( e. g. sealed) the various industries that operate in the area receive a productivity dividend due to:
• Reduced travel times and vehicle operating costs( including fuel, emissions and maintenance costs), particularly for heavy vehicles;
• Improved travel time reliability for freight( including, for example, gas, beef and cattle), by reducing the frequency and duration of road closures and providing safer opportunities for overtaking slower moving vehicles;
Benefits to firms:
• Agglomeration benefits in cities( e. g. proximity enhanced communications).
• Enhanced competition between firms.
• Increased output in the economy.
• Enhanced labour supply.
Benefits to Consumers:
• Improved access to jobs.
• Improved education outcomes.
• Improved community health outcomes.
• Improved access to cultural, social and recreational development activities.
Taken together these benefits all relate to the concept of‘ productivity’.
Productivity measures how efficiently production inputs, such as labour and capital, are being used
VOL. 11 NO. 1 2018 | 15