Understanding the Impact of Transportation on Economic Development

The interface between transportation investment and economic development has broad ramifications that go beyond transportation’s basic purpose of moving goods and people from one place to another. Whereas there is no doubt that transportation is essential in the operation of a market economy, much still needs to be understood about ways in which an efficient transportation system can improve the productivity of the economy. Transportation also has a broader role in shaping development and the environment. Policy concerns in the next millennium will increasingly focus on the effects of transportation on where people live and on where businesses locate; and on the effects that these location decisions have on land use patterns, congestion of urban transportation systems, use of natural resources, air and water quality, and the overall quality of life. Issues of urban sprawl, farmland preservation, and air and water quality have already pushed their way to the forefront of policy debates at both the national and local levels. To make prudent decisions, policy makers must be equipped with the best information and analysis possible about the interactions among these various factors. The questions asked by policy makers are two sided. Not only do they want to know the effect of transportation on additional economic development, they also want to know the transportation needs of future growth. Transportation analysts must tackle more complex questions than they did in the past. As the nation’s transportation system has matured and competition for government funds has intensified, the issue is not simply where to build another segment of highway or which airport needs to be expanded. The questions have become more complex. What mode of transportation is most cost-effective in meeting a region’s transportation needs? How should a state department of transportation prioritize its highway dollars to maximize economic growth? What is the trade-off between additional growth in an urban area and the cost of expanding transportation systems to accommodate greater growth? What effect does the expansion of transportation systems have on the need to invest in other types of infrastructure? Four factors are important in examining the relationship between transportation and economic development: (a) relevant type of transportation investment, (b) data necessary to analyze the economic effect of the investment, (c) appropriate methodology to analyze the economic effect, and (d) the proper dissemination of the results and education of professionals as to the economic effects of transportation investment.