Why transport is important

The first way of thinking suggests that providing more infrastructure will always improve area level productivity Jones, Of course, infrastructure can be very expensive so these productivity benefits might be outweighed by the costs of provision. This disparity between productivity benefits and costs may be particularly acute when infrastructure is used to try to turn around struggling local economies. Because infrastructure is durable, places that have seen slow growth will tend to have relatively large amounts of infrastructure per person.

The concrete manifestation of this are relatively low congestion levels in poorly performing cities. Economic theory — supported by empirical evidence - suggests that adding further transport investment in those places may not do much to improve productivity. In contrast, investing in congested places will tend to deliver higher returns because the congestion reflects the fact that these places have low infrastructure per person. The second way of thinking about infrastructure — as a network that connects different places — provides more mixed messages; particularly when it comes to better connecting rich and poor regions regions Baldwin, et al; One way to think about these types of transport investment is to view enhanced integration as a way of increasing the effective size of the local economies.

As a larger local economy means higher agglomeration economies this should help firms be more productive. There are two important caveats concerning this line of reasoning. First, the available empirical evidence suggests that agglomeration economies may attenuate quite quickly with distance.

It is not clear, therefore, whether connecting different cities will always generate significant agglomeration benefits. Second, lowering transport costs may encourage firms to move into the richer market and serve their customers from there. As is clear from the evidence we've reviewed, much more empirical work remains to be done on understanding the impact of infrastructure improvements on local economic growth.

Theoretical analysis certainly urges caution in assuming that infrastructure investment can stimulate growth in poorly performing areas. The outcome of the economic multiplier effects where the price of commodities, goods, or services drops and their variety increases. For instance, the steel industry requires the cost-efficient import of iron ore and coal for the blast furnaces and export activities for finished products such as steel booms and coils.

Manufacturers, retail outlets, and distribution centers handling imported containerized cargo rely on efficient transport and seaport operations. Transportation and Economic Opportunities Transportation developments that have taken place since the beginning of the industrial revolution have been linked to growing economic opportunities.

Historically, six major waves of economic development where a specific transport technology created new economic, market, and social opportunities can be suggested: Seaports. The historical importance of seaports in trade has been enduring. This importance was reinforced with the early stages of European expansion from the 16th to the 18th centuries, commonly known as the age of exploration.

Seaports supported the early development of international trade through colonial empires but were constrained by limited inland access. Later in the industrial revolution, many ports became important industrial platforms. With globalization and containerization, seaports increased their importance in supporting international trade and global supply chains.

The cargo handled by seaports is reflective of the economic complexity of their hinterlands. Simple economies are usually associated with bulk cargoes, while complex economies generate more containerized flows. Technological and commercial developments have incited a greater reliance on the oceans as an economic and circulation space. Rivers and canals. River trade has prevailed through history, and even canals were built where no significant altitude change existed since lock technology was rudimentary.

The first stage of the industrial revolution in the late 18th and early 19th centuries was linked with the development of canal systems with locks in Western Europe and North America, mainly to transport heavy goods. This permitted the development of rudimentary and constrained inland distribution systems, many of which are still used today.

The second stage of the industrial revolution in the 19th century was linked with the development and implementation of rail systems enabling more flexible and high capacity inland transportation systems. This opened substantial economic and social opportunities through the extraction of resources, the settlement of regions, and the growing mobility of freight and passengers.

The 20th century saw the rapid development of comprehensive road transportation systems, such as national highway systems and automobile manufacturing, as a major economic sector.

Individual transportation became widely available to mid-income social classes, particularly after the Second World War. This was associated with significant economic opportunities to service industrial and commercial markets with reliable door-to-door deliveries.

The automobile also permitted new forms of social opportunities, particularly with suburbanization. Airways and information technologies. The second half of the 20th century saw the development of global air and telecommunication networks in conjunction with economic globalization.

New organizational and managerial forms became possible, especially in the rapidly developing realm of logistics and supply chain management. Although maritime transportation is the physical linchpin of globalization, air transportation and IT support the accelerated mobility of passengers, specialized cargoes, and their associated information flows. Economic Returns of Transport Investments A common expectation is that transport investments will generate economic returns, which in the long run, should justify the initial capital commitment.

The most common reasons for the declining marginal returns of transport investments are: High accumulation of existing infrastructure. Where there is a high level of accessibility and where transportation networks that are already extensive, further investments usually result in marginal improvements. This means that the economic impacts of transport investments tend to be significant when infrastructures were previously lacking and tend to be marginal when an extensive network is already present.

Additional investments can thus have a limited impact outside convenience. Economic changes. As economies develop, their function tends to shift from the primary resource extraction and secondary manufacturing sectors towards advanced manufacturing, distribution, and services. These sectors rely on different transport systems and capabilities. While an economy depending on manufacturing will rely on road, rail, and port infrastructures, a service economy is more oriented towards the efficiency of logistics and urban transportation.

In all cases, transport infrastructure is important, but their relative importance in supporting the economy may shift. Due to clustering and agglomeration, several locations develop advantages that cannot be readily reversed through improvements in accessibility. Transportation can be a factor of concentration and dispersion depending on the context and the level of development. Less accessible regions thus do not necessarily benefit from transport investments if they are embedded in a system of unequal relations.

Types of Transportation Impacts The relationship between transportation and economic development is difficult to formally establish and has been debated for many years. This is further nuanced by the nature, scale, and scope of possible impacts: Timing of the development. The impacts of transportation can precede lead , occur during concomitantly , or take place after lag economic development. The lag, concomitant, and lead impacts make it difficult to separate the specific contributions of transport to development.

Each case appears to be specific to a set of timing circumstances that are difficult to replicate elsewhere. Types of impacts. They vary considerably as the spectrum ranges from positive to negative. Usually, transportation investments promote economic development, while in rarer cases, they may hinder a region by draining its resources in unproductive transportation projects.

Transportation as an Economic Factor Contemporary trends have underlined that economic development has become less dependent on relations with the environment resources and more dependent on relations across space.

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 access to labor and a reduction in access costs, mainly by improved commuting local scale or the use of lower-cost labor global scale.

The major impacts of transport on economic factors 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 region 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 regions as long as appropriate transport is available for trade.

Through geographic specialization supported by efficient transportation, economic productivity is promoted. This process is known in economic theory as comparative advantages that have enabled the economic specialization of regions. Scale and scope of production. An efficient transport system offering cost, time, and reliability advantages enable goods to be transported over longer distances.

This facilitates mass production through economies of scale because larger markets can be accessed. Thus, the more efficient transportation becomes the larger the markets that can be serviced, and the larger the scale of production.

Management of transport does not match how people use it. Most transport projects are managed by individual councils. In larger cities like Birmingham and Liverpool, a cross-border group manages transport for the wider city region.

But for cities within counties like Cambridge and Cambridgeshire or Preston and Lancashire, the funding for buses or management of traffic is not coordinated between the city and surrounding areas. Add the complexity of national transport organisations such as the Highways Agency and Network Rail and the forthcoming transport responsibilities of LEPs, and the system is increasingly complex and difficult to manage and fund effectively.

Instead, much of the capital funding for local transport projects will be routed through Local Enterprise Partnerships in a competitive bidding process.

So certainty and control over investment is the major challenge for cities. One challenge for LEPs in their new role will be to develop an approach for prioritising investment, weighing transport against housing, schools and other major project for a wide area.

Transport investment will also need to be linked to other policy areas in order to improve outcomes across all policy areas. This should encourage investors and government to think about the full investment package of transport within the economy rather than an individual transport project. Fractured responsibility and management means that UK cities do not get the most out of their transport systems. The quality of transport infrastructure in the UK is falling behind other developed countries and is often considered as a barrier to business growth.

Transport is the backbone of any economy. With the right infrastructure in place, including airports and good road links, the economy can grow. The majority of industries will use transportation in some form to boost their business, whether that is receiving goods, sending them out, or even working in the transportation industry itself, such as a cheap car shipping company.

The better the transportation is, the better the business can be. Workers will be on time and therefore less stressed, and good will get where they need to go quickly and safely. What is it that makes the difference between these areas?