1. The Economic Importance of Transportation
The transport sector is an important component of the economy impacting on
development and the welfare of populations. When transport systems are efficient,
they provide economic and social opportunities and benefits that impact throughout
the economy. When transport systems are deficient, they can have an economic
cost in terms of reduced or missed opportunities. Transport also carries an
important social and environmental load, which cannot be neglected. From a general
standpoint, the economic impacts of transportation can be
direct and indirect:
- Direct impacts related to accessibility change where transport
enables larger markets and enables to save time and costs.
- Indirect impacts related to the economic multiplier effect where
the price of commodities or services drop and/or their variety increases.
The impacts of transportation are not always intended, and can have unforeseen
consequences such as congestion. Mobility is one of the most fundamental
and important characteristics of economic activity as it satisfies the basic
need of going from one location to the other, a need shared by passengers, freight
and information. All economies do not share the same level of mobility as most
are in a different stage in the
transition. Economies that possess greater mobility are often those with
better opportunities to develop than those suffering from scarce mobility. Reduced
mobility impedes development while greater mobility is a catalyst for development.
Mobility is thus a reliable
indicator
of development.
Providing this mobility is an industry that offers services to its customers,
employs people and pays wages, invests capital and generates income. The economic
importance of the transportation industry can thus be assessed from a macroeconomic
and microeconomic perspective:
- At the macroeconomic level (the importance of transportation for
a whole economy), transportation and the mobility it confers are linked to
a level of output,
employment and income within a national economy. In many developed countries,
transportation accounts
between 6% and 12% of the GDP.
- At the microeconomic level (the importance of transportation for
specific parts of the economy) transportation is linked to producer, consumer
and production costs. The importance of specific transport activities and
infrastructure can thus be assessed for each
sector of the economy. Transportation accounts on average between 10%
and 15% of household expenditures while it accounts around 4% of the costs
of each unit of output in manufacturing.
Transportation links together the factors of production in a complex web
of relationships between producers and consumers. The outcome is a more efficient
division of production by an exploitation of geographical comparative advantages,
as well as the means to develop economies of scale and scope. The productivity
of space, capital and labor is thus enhanced with the efficiency of distribution.
It is acknowledged that economic growth is increasingly linked with transport
development. The following impacts can be assessed [Weisbrod, 2007]:
- Networks. Setting of routes enabling new or existing interactions
between economic entities.
- Performance. Improvement in cost and time attributes for existing
passenger and freight movements.
- Reliability. Improvement in the time performance, notably in terms
of punctuality, as well as reduced loss or damage.
- Market size. Access to a wider market base where economies of scale
in production, distribution and consumption can be achieved.
- Productivity. Increases in productivity from the access to a larger
and more diverse base of inputs (raw materials, parts, energy or labor) and
broader markets for diverse outputs (intermediate and finished goods).
2. Transportation and Economic Development
Transportation developments that have taken place since the beginning of
the industrial revolution have been linked to
growing economic opportunities. At each stage of human societal development,
a particular transport mode has been developed or adapted. However, it has been
observed that throughout history that no single transport has been solely responsible
for economic growth. Instead, modes have been linked with the direction and
the geographical setting in which growth was taking place. For instance,
major flows of international migration that occurred since the 18th century
were linked with the expansion of international and continental transport systems.
Transport has played a catalytic role in these migrations, transforming the
economic and social geography of many nations. Concomitantly, transportation
has been a tool of territorial control and exploitation, particularly during
the colonial era where
resource-based transport systems supported the extraction of commodities
in the developing world.
While some regions benefit from the development of transport systems, others
are often marginalized by a set of conditions in which inadequate transportation
play a role. Transport by itself is not a sufficient condition for development,
however the lack of transport infrastructures can been seen as a constraining
factor on development.
Investment in transport infrastructures is thus seen as a tool of regional
development, particularly in developing countries and for the road sector. The
relationship between transportation and economic development is thus difficult
to formally establish and has been debated for many years. The complexity lies
in the
variety of possible impacts:
- Timing of the development varies as the impacts of transportation
can either precede, occur during or take place after economic development.
The lag, concomitant and lead impacts make it difficult to separate the specific
contributions of transport to development, therefore. Each case study appears
to be specific to a set of timing circumstances that are difficult to replicate
elsewhere.
- Types of impacts vary considerably. The spectrum of impacts range
from the positive through the permissive to the negative. In some cases transportation
impacts can promote, in others they may hinder economic development in a region.
In many cases, few, if any, direct linkages could be clearly established.
Cycles of economic development provide a revealing conceptual perspective
about how transport systems evolve in time and space as they include the timing
and the nature of the transport impact on economic development. Transport, as
a technology, typically follows a path of experimentation, introduction, adoption
and diffusion and, finally, obsolescence, each of which has an impact on economic
development. In addition, transport modes and infrastructures are depreciating
assets that constantly require maintenance and upgrades. At some point, their
useful
lifespan
is exceeded and the vehicle must be retired or the infrastructure rebuilt. Thus,
transport investments for their amortization must consider the lifespan of the
concerned mode or infrastructure. In general, transport technology can be linked
to five
major waves of economic development (see Chapter 1,
Concept 3 for a detailed overview)
where a specific mode or system emerged:
- Seaports. Linked with the early stages of European expansion from
the 16th to the 18th centuries. They supported the development of international
trade through colonial empires, but were constrained by limited inland access.
- Rivers and canals. The first stage of the industrial revolution
in the late 18th and early 19th centuries was linked to the development of
canal systems in Western Europe and North America, mainly to transport heavy
goods. This permitted the development of rudimentary and constrained inland
distribution systems.
- Railways. The second stage of industrial revolution in the 19th
century was intimately linked to the development and implementation of rail
systems enabling a more flexible inland transportation system.
- Roads. The 20th century saw the development of road transportation
systems and automobile manufacturing. Individual transportation became a commodity
available to the masses, especially after the Second World War. This process
was reinforced by the development of highway systems.
- Airways and information. The later part of the 20th century saw
the development of global air and telecommunication networks in conjunction
with the globalization of economic activities. New organization, control and
maintenance capacities were made possible. Electronic communications have
become consistent with transport functions, especially in the rapidly developing
realm of logistics and supply chain management.
Contemporary trends have underlined that economic development has become
less dependent on relations with the environment (resources) and more dependent
on relations across space. While resources remain the foundation of economic
activities, the commodification of the economy has been linked with higher levels
of material flows of all kinds. Concomitantly, resources, capital and even labor
have shown increasing levels of mobility. This is particularly the case for
multinational firms that can
benefit from transport improvements in two significant markets:
- Commodity market. Improvement in the efficiency with which firms
have access to raw materials and parts as well as to their respective customers.
Thus, transportation expands opportunities to acquire and sell a variety of
commodities necessary for industrial and manufacturing systems.
- Labor market. Improvement in the access to labor and a reduction
in access costs, mainly by improved commuting (local scale) or the use of
lower cost labor (global scale).
3. Transport as a Factor of Production
Transportation is an economic factor of production of goods and services.
It provides market accessibility by linking producers and consumers. An efficient
transport system with modern infrastructures favors many economic changes, most
of them positive. The major impacts of transport on economic processes can be
categorized as follows:
-
Geographic specialization. Improvements in transportation and communication
favor a process of geographical specialization that increases productivity
and spatial interactions. An economic entity tends to produce goods and services
with the most appropriate combination of capital, labor, and raw materials.
A given area will thus tend to specialize in the production of goods and services
for which it has the greatest advantages (or the least disadvantages) compared
to other areas as long as appropriate transport is available for trade. Through
geographic specialization supported by efficient transportation, the economic
productivity is promoted. This process is known in economic theory as comparative
advantages.
- Large scale production. An efficient transport system offering
cost, time and reliability advantages permits goods to be transported further.
This facilitates mass production through economies of scale because more markets
can be accessed. The concept of
“just-in-time” has further expanded the productivity of production and
distribution. Thus, the more efficient transportation becomes, the larger
the markets that can be serviced and the larger the scale of production.
- Increased competition. When transport is efficient, the potential
market for a given product (or service) increases, and so does competition.
A wider array of goods and services becomes available to consumers through
competition which tends to reduce costs and promote quality and innovation.
- Increased land value. Land which is adjacent or serviced by good
transport services generally has greater value due to the utility it confers
to many activities. In some cases, the opposite can be true. Land located
near airports and highways, near noise and pollution sources, will thus suffer
from corresponding diminishing land value.
Transport also contributes to economic development through
job creation and its derived economic activities. Accordingly, a large number
of
direct (freighters, managers, shippers) and indirect (insurance, packaging,
handling, travel agencies, transit operators) employment are associated with
transport. Consumers take economic decisions on products, markets, costs, location,
prices which are themselves based on transport services, their availability,
costs and capacity.
4. Socioeconomic Impacts
While many of the economic impacts of transportation are positive, there
are also significant negative impacts that are assumed by individuals or by
the society in one way or another. Among the most significant are:
- Mobility gaps. Since mobility is one of the fundamental components
of the economic benefits of transportation, its variations are likely to have
substantial impacts on the opportunities of individuals. Mobility needs do
not always coincide due to several factors, namely the lack of income, lack
of time, lack of means and the lack of access. People’s mobility and transport
demands thus depend on their socioeconomic situation. The higher the income,
the higher the mobility, which may give rise to substantial
mobility gaps between different population groups. Gender gaps exist in
mobility as women tend to have lower incomes. Mobility gaps are particularly
prevalent for long distance travel. With the development of air transport,
a segment of the global population has achieved a very high level of mobility
for their business and leisure activities, while the great majority of the
global population has little mobility. This issue is expected to become
more acute as the population of many of the most advanced countries is
aging rapidly, which implies that access to mobility will not be an income
issue but an age issue. By 2020, about 10% of the global population (719
million) will be over 65 while by 2050 it will be 16% (1,492 million).
- Costs differences. Locations that have low levels of accessibility,
tend to have higher costs for many goods (sometimes basic necessities such
as food) as most have to be imported, often over long distances. The resulting
higher transport costs inhibit the competitiveness of such locations and limits
opportunities. Consumers and industries will pay higher prices, impacting
on their welfare (disposable income) and competitiveness.
- Congestion. With the increased use of transport systems, it has
become increasingly common for parts of the network to be used above design
capacity. Congestion is the outcome of such a situation with its associated
costs, delays and waste of energy. Distribution systems that rely upon on-time
deliveries are particularly susceptible to congestion.
- Accidents. The use of transport modes and infrastructure is never
entirely safe. Every motorized vehicle contains an element of danger and nuisance.
Due to human errors and various forms of physical failures (mechanical or
infrastructural) injuries, damages and even death occur. Accidents tend to
be proportional to the intensity of use of transport infrastructures which
means the more traffic the higher the probability for an accident to occur.
They have important socioeconomic impacts including healthcare, insurance,
damage to property and the loss of life. The respective level of safety depends
on the
mode of transport and the
speed at which an accident occurs. No mode is completely safe but the
road remains the most dangerous medium for transportation, accounting for
90% of all transport accidents on average (Statistics
for OECD countries). China has one of the highest car accident death rates
in the world, with more than 110,000 fatalities per year (300 per day), a
factor mainly due to recent growth in vehicle ownership.
The emission of pollutants related to transport activities has a wide range
of
environmental consequences that have to be assumed by the society
(
Chapter 8 provides a comprehensive overview
about transport and the environment), more specifically on four elements:
- Air quality. Atmospheric emissions from pollutants produced transportation,
especially by the internal combustion engine, are associated with air pollution,
acid rain and the potential for global warming. Some pollutants (NOx, CO,
O3, VOC, etc.) can produce respiratory troubles and aggravate cardiovascular
illnesses. In urban regions, about 50% of all air pollution emanates from
automobile traffic.
- Noise. A major irritant, noise can impact on human health and most
often human welfare. Noise can be manifested in three levels depending on
emissions intensity; psychological disturbances (perturbations, displeasure),
functional disturbances (sleep disorders, loss of work productivity, speech
interference) or physiological disturbances (health issues such as fatigue,
and hearing damage). Noise and vibration associated with trains, trucks, and
planes in the vicinity of airports are major irritants.
- Water quality. Accidental and nominal runoff of pollutants from
transport such as oil spills, are sources of contamination for both surface
water and groundwater.
- Land take. Transport is a
large consumer of space when all of its supporting infrastructure and
equipment are considered. Furthermore, the planning associated with these
structures does not always consider aesthetic values as is often the case
in the construction of urban highways. These visual impacts have adverse consequences
on the quality of life of nearby residents.
Copyright © 1998-2008, Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography,
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