The Welfare Effects of Transportation Infrastructure Improvements
By Treb Allen, Costas Arkolakis. 2019
161 citations recorded by the source corpus.
We develop a general equilibrium geographic framework to characterize the welfare effect of transportation infrastructure investments. We tackle three distinct but conflating challenges: First, we offer an analytical characterization of the routing problem and, in particular, how infrastructure investment between any two connected locations decreases the total trade costs between all pairs of locations. Second, we characterize how this cost reduction affects welfare within a standard general equilibrium geography setup where market inefficiencies arise due to agglomeration and dispersion spillovers. Finally, we show how our framework admits analytical characterizations of traffic congestion, which creates a critical – albeit tractable – feedback loop between trade costs and the general equilibrium economic system. We apply these results to calculate the welfare effects of improving each of the thousands of segments of the U.S. national highway network. We find large but heterogeneous welfare effects, with the largest gains concentrated in metropolitan areas and along important trading corridors.
Subfields: Economics and Econometrics, Transportation
View Paper: https://www.semanticscholar.org/paper/058a5939bbb478fefa98a40c406d5bd14dd0ca1c
Citations in the corpus
- Place-Based Policies and Spatial Disparities across European Cities (2020, unknown): “Allen and Arkolakis (2019) derive a framework to compute the welfare impact of local infrastructure improvements in the presence of agglomeration and congestion externalities.”
- The Average and Heterogeneous Effects of Transportation Investments: Evidence from Sub-Saharan Africa 1960–2010 (2020, unknown): “Another important recent literature has estimated the effects of transport costs and infrastructure investment within a general equilibrium trade model (Allen and Arkolakis, 2014, 2016; Fajgelbaum and Redding, 2014; Alder, 2017; Donaldson and Hornbeck, 2016; Morten and Oliveira, 2017).”