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Explaining low economic return on road investments. New evidence from Norway

Askill Halse and Lasse Fridstrøm

MPRA Paper from University Library of Munich, Germany

Abstract: Is regional policy to blame for the negative economic return on many road projects, or can road investments give value for money also in remote areas? In Norway, a large majority of planned road projects have negative net benefits according to cost-benefit analysis (CBA). In this paper, we point at geographic characteristics that can explain this, comparing Norway with its neighbors Sweden and Denmark. We then show econometric evidence that such factors also explain a substantial part of the variation in the benefit-cost ratio within Norway. Projects in areas that are far from the largest cities or have difficult topography have lower net benefits. This implies that there is a trade-off between economic efficiency and investing in roads in rural areas with difficult topography. We also discuss the role of road design requirements, decision-making processes and the electoral system for road investment policy.

Keywords: Cost-benefit analysis; road investments; regional policy; distributive politics (search for similar items in EconPapers)
JEL-codes: D61 D7 D72 R42 (search for similar items in EconPapers)
Date: 2019-01-04
New Economics Papers: this item is included in nep-eur, nep-ppm, nep-tre and nep-ure
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