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Estimating the Agglomeration Benefits of Transport Investments: Some Tests for Stability

Daniel Graham () and Kurt van Dender
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Kurt van Dender: OECD

No 2009/32, OECD/ITF Joint Transport Research Centre Discussion Papers from OECD Publishing

Abstract: The case for including agglomeration benefits within transport appraisal rests on an assumed causality between access to economic mass and productivity. Such causality is difficult to establish empirically because estimates may be subject to sources of bias from endogeneity and confounding. They may also be sensitive to the range of sample variance in agglomeration being used. The purpose of this paper is to demonstrate some of the key difficulties that the researcher faces in estimating agglomeration economies and to show how these can affect the calculation of agglomeration benefits for the appraisal of transport projects. The results show a high degree of sensitivity to treatment for unobserved heterogeneity and to differences in the sample variance of agglomeration. A key conclusion is that we are unable to distinguish agglomeration effects from other potential explanations for productivity increases, most notably functional heterogeneity. Consequently, the agglomeration effects of transport investments cannot be interpreted causally.

Keywords: agglomeration; causality; confounding; heterogeneity; transport (search for similar items in EconPapers)
JEL-codes: R12 R42 (search for similar items in EconPapers)
Date: 2009-12-01
New Economics Papers: this item is included in nep-geo and nep-ure
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https://doi.org/10.1787/5kmmr387j0zp-en (text/html)

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Journal Article: Estimating the agglomeration benefits of transport investments: some tests for stability (2011) Downloads
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