Modelling the Regional Economic Impacts of the Channel Tunnel

In 1991 the Directorate General XVI of the Commission of the European Communities commissioned a study to evaluate the impact of the opening of the Channel Tunnel on the economic development of regions within the European Community. Part of this study required a quantitative analysis of the regional economic effects of this infrastructure which was addressed through the development of a regional economic and transport model using the MEPLAN software package. The MEPLAN regional economic model incorporates a number of economic theories including a spatial adaptation of the Leontief input-output model and random utility theory to represent the linkages between transport infrastructure investment and regional economic development. For this study the European Community was divided into thirty-three zones. The economies of the European Community regions were described by a number of economic sectors. Industrial sectors generated demand for movements of commodities and service sectors generated demand for passenger movements either for business or for tourism or social purposes. The model was calibrated to match, in money terms, trade flows across the Channel. The model was used to test the effects of the opening of the Channel Tunnel, and its effects in conjunction with associated motorway and high-speed rail infrastructure investment through time. The economic effects on different sectors and in the different regions were measured through changes in economic indicators, specifically, changes in ‘Value added’ (the sum of payments on taxation, labour, and profits). The regional economic and transport model that was developed for this purpose is described, concentrating on the theoretical background and implementation of the regional economic model.