Modelling the economic impact of transport projects in sparse networks and peripheral regions

The lack of alternatives and choices make sparse networks and peripheral regions
distinct. Travel choices are limited, as are employment and supplier choices. This
thesis is therefore concerned with whether cost benefit analysis techniques need to be
adapted so as to adequately deal with the appraisal of transport projects in these
areas. Specifically, improved treatment of scheduling costs, uncertainty and wider
economic impacts is proposed. A theoretical case is made for the inclusion of
scheduling costs and the cost of risk bearing by drawing on the literature on time use,
departure time choice, activity scheduling, risk premia and option values. Similarly a
theoretical case is made for the inclusion of efficiency gains from an expansion in
output in imperfectly competitive markets, an expansion of employment in the presence
of a labour market failure, and an increase in productivity in industry clusters.
A survey of ferry users and island residents in the Outer Hebrides finds evidence of
statistically significant costs associated with transport related constraints on activity
scheduling. These costs decrease non-linearly in the transport constraints - headway
and operating hours. A difficulty faced when estimating discrete choice models with
taste variation is a lack of knowledge of the distribution of willingness to pay. This
difficulty can be overcome through a mix of contingent valuation questions and stated
preference questions with fixed boundary values. Significant differences are found in
willingness to pay depending on whether the stated choice question is framed as per
trip or per year. In contrast to what might be expected from the options value literature,
no difference in the cost of risk bearing is found between a fixed link and a high quality
ferry service. Further empirical work identifies less than complete wage compensation
for commuting costs of workers in peripheral areas of Scotland. This indicates the
presence of a labour market failure arising through high job search costs in a thin
labour market.
The main conclusion of the thesis is that the scope of a cost benefit analysis should be
widened to include the studied effects. The case studies undertaken show that for
public transport projects the effects, in totality, can be a similar order of magnitude to
user benefits. Importantly, the large potential benefits from fixed links and the low
incomes evident in peripheral regions combine to make income effects important, when
calculating total economic welfare in these areas. Further research opportunities on
scheduling costs, risk premia and thin labour markets are identified.