DIRECT INCORPORATION OF TRANSPORT COSTS IN REGIONAL ECONOMIC AND TRANSPORT MODELLING IN EUROPE

Integrated regional economic and transport models may be used to assess the effect of transport infrastructure, or lack of it, on the functioning of the economy across a geographical area. They may be designed to cover all modes of transport, as well as to provide a coherent analysis of transport supply and demand. This paper presents a recent development in this integrated modelling methodology, namely the direct incorporation of transport costs in the input-output structure used by the regional economic model. The work is being carried out in the course of a study for the Commission of the European Communities Directorate-General XV, which is due for completion in April 1996. Both monetary transport expenditure and quality of service are considered. There is growing evidence that better quality of service leads to cost savings in non-transport operations, such as logistics. Without taking such indirect savings into account the model evaluation would not be able to correctly identify the benefits of many policies and projects designed to improve service quality. Transport-related costs thus derived are then incorporated directly in the input-output structure to build up the production costs for all branches included. Linking the transport branch in the input-output table with the simulated costs from the transport module ensures consistent treatment of the transport component. For project and policy evaluation, transport-related cost changes may be readily reflected in production costs at different locations. This therefore leads to an assessment of the direct and indirect impact of transport infrastructure on the regional economy. The paper discusses the use of data and the estimation procedure specifically for the European context. For the covering abstract, see IRRD 887882.