Transport Infrastructure and Technology: Investment, Externalities, and General Equilibrium Effects

Transportation fulfils a double role in an economic system; it is an economic sector which, just like any other sector, aims to maximize its performance, while it is also a necessary production factor allowing for commodity trade and human mobility. Transport in the latter capacity — in terms of both transportation services and infrastructure provision — needs to be produced by means of scarce inputs, and hence can be cast in the framework of a generalized production function approach. It is somewhat surprising that transportation has received insufficient attention from the perspective of general equilibrium analysis in economics, as only such an approach can consistently address the economy-wide character of the impacts of transportation as well as its negative external effects. The latter include both system-wide environmental and health effects and transportation-specific congestion and safety effects. In contrast to analyses of a partial nature, it seems clear that an economy-wide perspective cannot easily be regarded as flawless when space is assumed away, as this would essentially mean that one assumes that movement of goods can be realized without transportation costs. In most of the analytical literature however, even less attention has been devoted to the fact that these costs are, in turn, affected by various factors, such as input prices of transportation, spatial demand for transportation services, and the presence of transportation-induced externalities such as congestion.