Simple Measurement Method for Transport Improvement Effect in Case of an External Economy

Abstract

　　In evaluating transport improvement, Japan’s cost-benefit analysis only calculates user benefit.　On the other side, not only user benefit but also external effect which is generally called “wider economic benefit” is used in UK cost-benefit guidance.

　　In the case of measuring external effects for transport improvement, spatial computable general equilibrium analysis （CGE） is generally applied in Japan, but the UK guidance proposes a simple formula is applied to calculate external effect not including user benefit.

　　This paper shows that the UK guidance measuring the external effect is consistent with the theoretical general equilibrium approach.

　　Comparing simple calculation by wider benefit formula and calculation by CGE method, the simple calculation is sufficient to apply in an empirical analysis.　This paper proposes a simple and applicable method for measuring external effects in transport improvement project.

　　However, there are cautions in the apply simple formula for calculating wider economic benefit.　It is necessary to pay attention to what external effects are considered.　For example, in case of technical external effect, agglomeration effects are formulated by accessibility function.　And increasing output effect is not appeared.

　　In case of monetary external effect are considered, agglomeration effects are formulated by regional migration function.　And an increasing output effect is appeared because of imperfect market.

JEL Classifications:R13, R23, R40