THE LAST WORD
T Speeding towards economic growth
he expectation that transport innovations would lead to sustainable economic growth has long since motivated public investment into large-scale infrastructure investment.
One transport system which currently features prominently on the planning agendas in many industrialized and developing countries is High Speed Rail (HSR) – mainly because of its comparative advantages in terms of travel time at intermediate distances and a widely acknowledged eco-friendliness. Indeed, on the basis of recent economic geography theories it can be concluded that, by driving economic agents closer together and improving customer and business relations, HSR should promote economic development.
Whether these expected benefits occur in reality, however, is difficult to detect in practice. One of the empirical challenges in identifying the impact of HSR results from the fact that the strongest economic agglomerations are usually connected first as they naturally generate the largest demand.
Given that it is likely that the areas connected by HSR are those that do or are expected to perform best, it is difficult to establish the counterfactual of what would have happened in the absence of an HSR line and to disentangle its effects from the natural growth path. Second, if the largest agglomerations are connected, the marginal impact on accessibility of an HSR line, due to large home-markets and competing transport modes, may be too small to trigger statistically measurable effects.
the stations in Montabaur and Limburg as a “natural experiment”, we ran a quasi- experimental analysis where we compared the economic development of areas that received a “treatment” to other nearby locations that served as control areas.
Dr Gabriel M Ahlfeldt
For these reasons the German ICE track running from Cologne to Frankfurt that was opened in 2002 makes a particularly interesting case in point for a statistical analysis. The line is part of the Trans-European Networks and facilitates train velocities of up to 300 km/h. Travel time between both metropolises was reduced by more than 55% in comparison to the old track and by more than 35% in comparison to car travel.
Most importantly, however, two small towns in the middle of the track, Montabaur and Limburg, received their own stations on the new line. The connection of these towns was the outcome of long and complex negotiations among authorities at the federal, state and municipality level, the rail carrier Deutsche Bahn and various activist groups. Rather than resulting from a viable economic interest, the stops were eventually a result of heavy lobbying from the involved federal states to maximize the number of stations within their territories.
We took advantage of this rare setting, where economic motivations for the presence of HSR stations can be rejected, to conduct a spatial economic analysis of HSR effects under ‘quasi-laboratory conditions’. Treating the inauguration of
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Holding individual county characteristics constant, our most careful estimate indicated that areas adjacent to our treatment stations, on average, grew by 2.7% more in terms of GDP than surrounding areas. A similar increase could be found in terms of employment at workplace. Notably, it took a four-year adjustment period before the new equilibrium was reached.
To arrive at a more generalized conclusion, we calculated the shortest travel times between each pair of about 3,000 municipalities in the study areas for both the situations where the HSR was available or not. We used these travel time matrices to create an index of accessibility for each municipality as the sum of GDP of all municipalities, weighted by travel time. Such an indicator, where locations at farther distances receive smaller weights, is typically used as a measure of market access in the economic geography literature.
By comparing changes in market access and GDP during the adjustment period, it could be concluded that for each 1% increase in market access an economic growth effect of about 0.25% was achieved. Our estimates remained stable, no matter whether we considered various local economic and
The economics of high speed rail lines are notoriously complex, but some academics are working on the problem. Dr Gabriel M Ahlfeldt, lecturer in urban economics and land development at the London School of Economics, gave Rail Technology Magazine an insight into a recent study
geographical conditions, construction and substitution effects along the old line, local industrial compositions as well as their changes over time, among other tests.
Further investigations showed the economic effects were primarily driven by the attraction of new firms as opposed to population gains, although to a limited degree, an increase in commuting was evident, too. The telecommunications provider 1&1, who in response to the new travel opportunities established their headquarters adjacent to the Montabaur ICE-station, stands exemplary for the attraction of new businesses.
Altogether these findings indicate the HSR link had a sustainable, significantly positive economic effect and that the most evident alternative explanations can be ruled out.
One thing does, however, have to be noted. We did not calculate the counterfactual for a scenario where the HSR track was built but Montabaur and Limburg remained unconnected. While the case serves as a useful natural experiment, it is not possible to generalize from our findings that it should be recommendable to connect various individual towns along an HSR line.
Editorial Notes: “From Periphery to Core: Economic Adjustments to High Speed Rail”, by Dr Gabriel M Ahlfeldt (LSE) and Dr Arne Feddersen (University of Southern Denmark) will soon be released in the IEB working paper series.
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