Authors: Dr. Jean-Paul Rodrigue and Dr. Theo Notteboom

The development of transportation systems is embedded within the scale and context in which they take place; from the local to the global and from environmental, historical, technological and economic perspectives.

Development can be defined as improving the welfare of a society through appropriate social, political and economic conditions. The expected outcomes are quantitative and qualitative improvements in human capital (e.g. income and education levels) as well as physical capital such as infrastructures (utilities, transport, telecommunications).

The development of transportation systems takes place in a socioeconomic context. While development policies and strategies tend to focus on physical capital, recent years have seen a better balance by including human capital issues. Irrespective of the relative importance of physical versus human capital, development cannot occur without both interacting as infrastructures cannot remain effective without proper operations and maintenance while economic activities cannot take place without an infrastructure base. The highly transactional and service-oriented functions of many transport activities underline the complex relationship between its physical and human capital needs. For instance, effective logistics rely on infrastructures and managerial expertise.

Because of its intensive use of infrastructures, the transport sector is an important component of the economy and a common tool used for development. This is even more so in a global economy where economic opportunities have been increasingly related to the mobility of people and freight, including information and communication technologies. A relation between the quantity and quality of transport infrastructure and the level of economic development is apparent. High-density transport infrastructure and highly connected networks are commonly associated with high levels of development. When transport systems are efficient, they provide economic and social opportunities and benefits that result in positive multiplier effects such as better accessibility to markets, employment, and additional investments. When transport systems are deficient in terms of capacity or reliability, they can have an economic cost such as reduced or missed opportunities and lower quality of life.

At the aggregate level, efficient transportation reduces costs in many economic sectors, while inefficient transportation increases these costs. In addition, the impacts of transportation are not always intended and can have unforeseen or unintended consequences. For instance, congestion is often an unintended consequence in the provision of free or low-cost transport infrastructure to the users. However, congestion is also an indication of a growing economy where capacity and infrastructure have difficulties keeping up with the rising mobility demands. Transport carries an important social and environmental load, which cannot be neglected. Assessing the economic importance of transportation requires the categorization of the types of impacts it conveys. These involve core (the physical characteristics of transportation), operational and geographical dimensions:

  • Core. The most fundamental impacts of transportation-related to the physical capacity to convey passengers and goods and the associated costs to support this mobility. This involves the setting of routes enabling new or existing interactions between economic entities.
  • Operational. Improvement in the time performance, notably in terms of reliability, as well as reduced loss or damage. This implies a better utilization level of existing transportation assets benefiting its users as passengers and freight are conveyed more rapidly and with fewer delays.
  • Geographical. Access to a wider market base where economies of scale in production, distribution, and consumption can be improved. 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). Another important geographical impact concerns the influence of transport on the location of activities and its impacts on land values.

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{d93457022679712214ff8a8035fa266341f9634f2c93d5e609b1bbb089e8c446} and 12{d93457022679712214ff8a8035fa266341f9634f2c93d5e609b1bbb089e8c446} of the GDP. Looking at a more comprehensive level to include logistics costs, such costs can account between 6{d93457022679712214ff8a8035fa266341f9634f2c93d5e609b1bbb089e8c446} and 25{d93457022679712214ff8a8035fa266341f9634f2c93d5e609b1bbb089e8c446} of the GDP. Further, the value of all transportation assets, including infrastructures and vehicles, can easily account for half the GDP of an advanced economy.
  • At the microeconomic level (the importance of transportation for specific parts of the economy) transportation is linked to producer, consumer, and distribution costs. The importance of specific transport activities and infrastructure can thus be assessed for each sector of the economy. Usually, higher income levels are associated with a greater share of transportation in consumption expenses. Transportation accounts on average between 10{d93457022679712214ff8a8035fa266341f9634f2c93d5e609b1bbb089e8c446} and 15{d93457022679712214ff8a8035fa266341f9634f2c93d5e609b1bbb089e8c446} of household expenditures, while it accounts for around 4{d93457022679712214ff8a8035fa266341f9634f2c93d5e609b1bbb089e8c446} of the costs of each unit of output in manufacturing, but this figure varies greatly according to sub-sectors.

Source Article