Modelling the Economic Impacts of Inter-City Connectivity

Current economic appraisal guidelines focus on direct cost savings and over the last 10 to 15 years methods have also been developed to evaluate urbanisation effects within city regions but there has been much less focus on the effects of linking urban areas. These effects include the potential for fostering increased trade and specialisation leading to localisation benefits. The lack of focus on these impacts in economic appraisals is due to the complexity of the processes and the small evidence base which this thesis aims to contribute to.

To investigate the economic impacts of inter-city connectivity a dynamic model was developed based on the system dynamics approach. The model includes an innovative structure with a target-based/goal-seeking approach for determining equilibrium in the labour and capital markets. Changes in effective density impact on wages and capital rents and labour and capital can move sector and zone to maximise their returns. The results show that sectoral and zonal mobility costs limit the potential for increased specialisation through investment in inter-city transport and increases in specialisation are more likely to arise when the scheme effects differ between sectors and between cities.

The impact of including localisation benefits and changes in specialisation in the economic appraisal of inter-city connectivity schemes was investigated using an abstract static model. With the central case assumptions it was estimated that their inclusion would increase the total present value of benefits by 7.9% for a 150km distance between two cities. Using a similar method a case study was undertaken of the proposed Northern Powerhouse Rail scheme in the north of England. This showed that with detailed GJT and land-use changes the estimated additional benefits are comparable to those from the abstract model but they can be unevenly distributed and that there can be losers as well as winners.