Economic Development

Transportation Impacts

Transportation modes for general public use include bicycles, animals such as horses and donkeys, boats and ferries, personal vehicles, public transportation (such as buses, subways, intercity rail transit, and high-speed trains), airplanes, and others. These transportation tools would not have been used widely without the companion of transportation infrastructure including roads, waterways, highways, railroads, airports, and others. The advances in transportation tools and improvements in transportation infrastructure have played an important role in decentralizing population and businesses as well as promoting economic growth and development.

The past century saw urban decentralization and low-density sprawl largely due to transportation and communication improvements. Convenient highway networks and personal vehicles allow people to live farther from their workplaces while enjoying low living costs and high quality of life in suburban and rural areas adjacent to metropolitan areas. In addition, the greater availability of air transport reduces travel time between cities, enables increased interactions between them, and integrates otherwise isolated economic regions into a nationwide or worldwide economic region. Intercity rail transit and high-speed trains, which provide safer trip experiences, could further promote the decentralization of population and firms.

Regional Economic Explanations

The way transportation affects economic development has been explained by many theories. Here three regional economic theories are discussed: central place theory, growth pole theory, and neoclassical growth theory.

According to central place theory, transportation infrastructure enables the flow of raw materials, capital, finished goods, consumers, and ideas [Page 454]between central locations and their hinterlands. Transportation costs are vital for determining locations for both firms and households. For the sake of maximizing profits, business locations are typically chosen based on where costs (including transportation costs) can be minimized and demand is maximized. Meanwhile, preferred locations for households have low land costs and offer easy access to both high wage employment and urban amenities in central areas and natural amenities in outlying areas.

In growth pole theory, the notions of spread and backwash serve to assess how mutually dependent metropolitan areas and their surrounding rural areas are on each other in terms of economic growth and development. This theory mostly looks at highways as a catalyst of change. However, a highway connecting a metropolitan area with its surrounding areas alone represents neither a necessary nor a sufficient influence for economic growth in the two areas; the alternative and equally possible outcome would be economic decline.

According to neoclassical growth theory, transportation infrastructure contributes to the production function. The production function assumes a relationship between inputs and outputs into the production process in an area. Accordingly, investing in transportation infrastructure serves as a type of public capital and flows into the production process. A large proportion of studies in neoclassical growth theory investigate how public capital and economic productivity are connected through the production function. Most claim that economic output increases with an augmentation of transportation infrastructure.

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