WEBs: Wider Economic Benefits
Quantifying the Agglomeration Effects of Swiss Public Transport Between 2000 and 2010
Project details
Duration
10.2013-07.2015
Sponsor
Staff
Professor K.W. Axhausen, G. Sarlas and R. Fuhrer
Summary
Transport systems govern to a great extent the intensity of economic activity in space. A prominent concept to describe this are agglomeration effects. The goal of this research project is to quantify these effects for the first time in Switzerland and elsewhere by linking salaries (as a proxy of productivity) to the improvements in both private and public transport supply.
The theory of agglomeration effects was reformulated by the New Geographic Economy (Krugman, 1991) and has been examined in various countries (Melo et al., 2009). The basic idea is that economic productivity increases by reducing generalised travel costs within an economically connected space. This increase goes beyond the increases expected by previous theory: lower generalised costs allow more people to be connected within an economical region. As a result, externalities arise that can lead to positive effects on productivity (Graham 2007). In particular, Duranton and Puga (2003), in their discussion of micro-foundations of urban agglomeration economies, mention three main mechanisms that are responsible for agglomerations’ economy gains: better matching, the likelihood that a position can be occupied by the most qualified person increases; sharing costs and risks, several goods can be shared amongst market participants (e.g. apprenticeship training, logistics); better learning, diversity and density lead to greater knowledge generation and diffusion. These mechanisms increase productivity of an area not only with an additional participant but at the same time per additional participant. Transport supply facilitates a “fake” spatial density by bringing together different market participants. As the result of improved transport connections and thus reduced generalised costs the spatial economy becomes “denser” and consequently more productive by exploiting agglomeration effects.