Land use/transport models and economic assessment

Abstract

This paper discusses the economic assessment of policies using land use/transport models. It argues that conventional forms of assessment focussing only on transport changes can underestimate the economic benefits of a policy. The paper argues that the benefits need to be measured by the changes of prices at the end of a trip and not just by the changes in travel costs. Models that do not estimate the changes of prices at the end of a trip cannot properly assess the impact of a policy. The model used in this paper is based on the MEPLAN software and estimates the location of households and employment and the interaction between them. It also estimates the cost of living for households and the production costs for employment. With these costs, it is possible to calculate the wider economic benefits beyond transport. The paper illustrates the assessment of policies for the Cambridge sub-region involving investment in public transport, orbital highway and congestion charging policies. The results forecast by the model are assessed in terms of the conventional cost-benefit using traveller’s surplus as benefits and compared with a wider assessment measure of compensation variation. It demonstrates that the last measure encompasses the wider benefits associated with transport policies which are not taken into account in conventional cost-benefit analysis.