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Transport economics

Transport economics is a cross-disciplinary study linking civil engineering and economics. Transport economics differs from some other branches of economics in that the assumption of a spaceless, instantaneous economy does not hold. People and goods flow over networks at certain speeds. Demands peak. Advanced ticket purchase is often induced by lower fares. The networks themselves may or may not be competitive. A single trip (the final good from the point-of-view of the consumer) may require bundling the services provided by several firms, agencies and modes.

Table of contents
1 Demand
2 Supply
3 Externalities
4 Pricing
5 Financing
6 Regulation
7 Privatization
8 Project Evaluation
9 See also


Estimating the demand for transportation facilities is more difficult than estimating demand for traditional goods because of network effects in transportation and because transportation involves choices between non-similar goods (e.g. should I take a car or bus). These discrete choice models have led to an important branch of econometrics, and a Nobel Prize in Economics for Daniel McFadden.




Transport produces benefits for users, but may impose costs on non-users. These negative externalities figure prominently in transportation economics. Major externalities are air pollution, lack of traffic safety, and congestion. The potential for global warming is another, more difficult to monetize, externality.


Road pricing is becoming a popular (at least in the transport economics community) mechanism to allocate temporarily scarce roadway capacity to users.


Transport is financed in different ways depending on the mode. Public infrastructure is often financed with user fees such as a
gasoline tax in the highway sector.


The regulation of public transport is often designed to achieve some social, geographic and temporal equity as market forces might otherwise lead to services being limited to the most popular travel times along the most densely settled corridors of development. State, regional or municipal taxes are often deployed to extend timetables through the daytime, weekend, holiday or evening periods and to intensify the mesh of routes above that which a lightly regulated market would probably provide. Franchising may be used to strike a balance between frugal operations and a socially acceptable array of services supportive of an area's economic life. Agile people able to buy private transport facilities often resent paying taxes to support transit options for their fellow citizens.


See privatization

Project Evaluation

One difficulty is the valuation of time, time is valued differently in different societies and also by different strata in the same society. The valuation of time and the identification of trends in that valuation are therefore key factors in assessing whether investments in transport facilities are economically worthwhile. The geographic, environmental and social impacts of changed transport networks have been much better appreciated since 1975, in particular an awareness that enlarged network capacity actually generates trips that would not otherwise have been made (induced demand) has grown.

See also