Cost Benefit Analysis of a Transport Improvement in the Case of Search Unemployment

Ninette Pilegaard and Mogens Fosgerau

Journal of Transport Economics and Policy, 2008, vol. 42, issue 1, 23-42

Abstract: We examine the implications of search unemployment for the evaluation of a transport investment in a conventional cost benefit analysis (CBA) assuming perfect competition. Lower transport costs induce search over a larger area and longer commuting distances. The expected duration of vacancies is reduced with ensuing benefits outweighing the loss to increased transport. The search imperfection drives a wedge between the marginal product of labour and the wage, such that the final benefits of a transport improvement exceed those of a conventional CBA. Using a simulation model we find these additional benefits may be substantial. © 2008 LSE and the University of Bath

Date: 2008
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Working Paper: Cost benefit-analysis of a transport improvement in the case of search unemployment (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:tpe:jtecpo:v:42:y:2008:i:1:p:23-42

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