The Welfare Effects of Transportation Infrastructure Improvements

Treb Allen and Costas Arkolakis

No 25487, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Each year in the U.S., hundreds of billions of dollars are spent on transportation infrastructure and billions of hours are lost in traffic. We incorporate traffic congestion into a quantitative general equilibrium spatial framework and apply it to evaluate the welfare impact of transportation infrastructure improvements. Our approach yields analytical expressions for transportation costs between any two locations, the traffic along each link of the transportation network, and the equilibrium distribution of economic activity across the economy, each as a function of the underlying quality of infrastructure and the strength of traffic congestion. We characterize the properties of such an equilibrium and show how the framework can be combined with traffic data to evaluate the impact of improving any segment of the infrastructure network. Applying our framework to both the U.S. highway network and the Seattle road network, we find highly variable returns to investment across different links in the respective transportation networks, highlighting the importance of well-targeted infrastructure investment.

JEL-codes: H54 R12 R13 R41 R42 (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-tre and nep-ure
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Citations: View citations in EconPapers (59)

Published as Treb Allen & Costas Arkolakis, 2022. "The Welfare Effects of Transportation Infrastructure Improvements," The Review of Economic Studies, vol 89(6), pages 2911-2957.

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Journal Article: The Welfare Effects of Transportation Infrastructure Improvements (2022)
Working Paper: The Welfare Effects of Transportation Infrastructure Improvements (2019)
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