IMPACT OF TRANSPORTATION ON ECONOMIC GROWTH: AN ASSESSMENT OF ROAD AND RAIL TRANSPORT SYSTEMS

IMPACT OF TRANSPORTATION ON ECONOMIC GROWTH: AN ASSESSMENT OF ROAD AND RAIL TRANSPORT SYSTEMS

INTRODUCTION

The presence of a reliable and efficient transportation system is one of the key factors that play a pivotal role in a region’s economic growth. This is primarily due to the fact that a well-developed transportation system provides adequate access to the region, which in turn is a necessary condition for the efficient operation of manufacturing, retail, labor, and housing markets.

Transportation is an essential component of economic growth and development. It is an industry in and of itself that generates wealth. Inadequate transportation restricts a country’s ability to use its natural resources, distributes foods and other finished goods, integrates the manufacturing and agriculture sectors, and provides education, medical, and other infrastructure. As a result, there is a need to maintain and improve existing transportation.

and construct new infrastructure for national wealth. The national wealth is measured by GDP, which is an indicator or measure of the rate of economic growth.

Transportation infrastructure is critical to sustaining economic growth because people want to improve their standard of living and see increased income as a way to do so. Transportation system improvements, in turn, are a means of maintaining or improving economic opportunities, quality of life, and, ultimately, income for people in a specific region. Lucas (1998) (1998)

Transportation also has a larger impact on development and the environment. Policy concerns in the next millennium will increasingly center on the effects of transportation on where people live and where businesses locate, as well as on the effects of transportation on the environment.

that these site selection decisions have on land use patterns, urban transportation system congestion, natural resource use, air and water quality, and overall quality of life Urban sprawl, farmland preservation, and air and water quality have already risen to the top of policy debates at the national and local levels. To make sound decisions, policymakers must have access to the most up-to-date information and analysis on the interactions of these various factors.

Transportation is the backbone of any economy, especially in developing countries like Nigeria, so an anatomy of aspects relating to inefficiencies and a lack of a good transportation network in Nigeria, coupled with a low rate of economic growth (GDP), is critical.

Government transportation policy (lack of regulation of fees charged by private transporters, insufficient fuel). Lack of spare parts, as well as the prevalence of bad roads and a lack of security, have succeeded in reducing Nigeria’s transportation system, which has a negative impact on economic growth.

Transportation infrastructure investment is critical for long-term economic growth. According to mobility studies, transportation is critical to economic productivity and maintaining global competitiveness. According to an international study, every 10% increase in travel speed results in a 15% increase in labor market expansion and a 3% increase in productivity (Barrister and Berechinan. 2000).

It is widely acknowledged that transportation is critical for a country’s long-term economic growth and modernization. The sufficiency of this critical infrastructure

is a key determinant of a country’s success in diversifying its production base, expanding trade, and connecting resources and markets into an integrated economy. It is also required for connecting villages with towns, market centers, and bringing remote and developing regions closer together. As a result, transportation is a critical input for manufacturing processes, and adequate transportation infrastructure and services aid in increasing productivity and lowering production costs.

The provision of transportation infrastructure and services aids in poverty reduction. It goes without saying that various public actions aimed at reducing poverty cannot succeed in the absence of adequate transportation infrastructure and services. Without first achieving universal education and healthcare for all, it is difficult to envision meeting the targets.

providing adequate transport facilities.

All sectors, including transportation, operate within the State’s socioeconomic framework. Within the framework, specific policies are designed for each sector in order to meet national goals and objectives. Currently, the primary goal of India’s development planning is to increase GDP growth (GDP). The goal is to achieve 8% GDP growth by 2007, i.e. by the end of the Tenth Five Year Plan. Higher rates of economic growth must be accompanied by greater dispersion of economic activity and must be consistent with the goals of poverty reduction, provision of gainful and high-quality employment, literacy improvement, population growth reduction, and gender inequality reduction.

decrease in illiteracy and wage rate, decrease in infant mortality, and so on. Transport, as a service industry, does not exist for its own sake. It serves as a vehicle for achieving other goals. Various macro objectives mentioned above must therefore be considered when developing policy for the development of the transportation sector. Some are economic in nature, while others are sociopolitical in nature. Economic and non-economic goals are not always in sync. However, their mix is one of the key factors influencing the pattern of investment and funding in various sectors of the economy.

Transport demand, both freight and passenger, is related to economic activity and development requirements. It runs parallel to GDP growth. A greater

As the rate of growth increases, so will the demand for transportation. However, as GDP growth causes economic activity to disperse, demand for transportation will rise even more.

The structural changes in the Indian economy have an impact on the demand for transportation services. As a result, the share of high-value, low-volume commodities has increased, necessitating more flexible modes of transportation such as road transport. Because of migration and population growth, the level of urbanization has increased. As a result, the share of total GDP contributed by urban areas has increased. Such a spatial shift in the distribution and concentration of economic activity has far-reaching consequences for the environment and society.

level of transport demand. The most visible effect was an increase in demand for urban transportation services. Taking a variety of factors into account, it is expected that the elasticity of demand for freight traffic in relation to GDP growth will decrease in the future, but will remain greater than one. With India’s determination to pursue higher growth, demand for transportation will continue to rise at a rapid pace.

TRANSPORTATION AND ECONOMIC DEVELOPMENT

Transportation also helps the economy by creating millions of jobs. It enables men and women to earn a living by designing and manufacturing vehicles, as well as driving, maintaining, and regulating them to ensure the safe and efficient movement of goods and people. a single out of every Transportation is responsible for seven jobs in the United States. Transportation jobs in transportation and non-transportation industries employed nearly 20 million people in 2002, accounting for 16% of total occupational employment in the United States. For example, the for-hire transportation industry employed more than 44 million people. In 2002 More than 60% of these for-hire employees work in freight-related occupations or jobs that directly support freight transportation. Another 1.7 million people work in transportation equipment manufacturing, and another 4.5 million work in transportation-related industries like automotive service and repair, highway construction, and motor vehicle and parts dealers (USDOT BTS 2004). Transportation-related occupations, such as truck drivers and freight brokers, account for a significant portion of employment in non-transportation industries.

In the wholesale and retail industries, there are agents and freight-moving workers. There were approximately 9.2 million people employed in transportation-related occupations in non-transportation industries in 2002.

Productivity growth is the primary driver of economic growth. Productivity growth in freight transportation has long been a driving force for overall productivity growth in the United States, contributing directly to GDP growth. For example, from 1991 to 2000, labor productivity in the non-farm business sector increased by 21%. During the same time period, rail labor productivity increased by 53%, trucking productivity increased by 23%, and pipeline productivity increased by 143%. All three of these modes of transportation are primarily used for freight transportation. Lower transportation costs and lower prices result from such productivity gains.

consumers. This saves consumers money and lowers business costs.

Transportation Economic Benefits Evaluation

If all of the preceding steps are taken, planners and policymakers will be left with a list of investments with the potential to generate economic benefits. Figure A-7 depicts a three-part analysis that provides a reasonable comprehensive analysis of each project’s likely contribution to economic development.

When a highway improvement is proposed, the economic analysis must first determine which industries will be affected. This entails the three analytical steps outlined below within the Commodity Flow analysis.

Determine the location of the improvement on the highway or rail network.

Determine the commodities being shipped as well as the number of person trips on the roadway that will benefit from the proposed improvements.

Estimate the rise of these commodities.

Determine the origins and destinations of these commodities, as well as the industries involved in shipping and receiving.

Transportation by Road

An automobile is a four-wheeled passenger vehicle with its own motor. Automobiles of various types include cars, buses, trucks, and vans. Motorcycles are included in the category by some, but cars are the most common automobiles. In 2002, there were 590 million passenger cars in the world (roughly one car for every ten people), with 170 million in the United States (roughly one car for every two people). Wikipedia, (2007) (2007)

When it was first introduced in the 1890s, the automobile was thought to be a better environmental choice than horses. Prior to its introduction, more than 1,800 tons of coal were mined in New York City alone.

Manure had to be removed from the streets on a daily basis, despite the fact that it was used as natural fertilizer for crops and to build top soil. In 2006, the automobile was identified as one of the primary sources of global air pollution, as well as a source of significant noise pollution and adverse health effects.

Horses, oxen, and even humans were the first modes of road transport, transporting goods over dirt tracks that often followed game trails. As commerce grew, the tracks were frequently flattened or widened to accommodate it. Thetravois, a frame used to drag loads, was later developed. The wheel arrived later, most likely preceded by the use of logs as rollers.

With the rise of the Roman Empire, armies required the ability to travel.

quickly from one area to another, and the roads that did exist were frequently muddy, causing large masses of troops to be greatly delayed in their movement. The Romans built massive roads to solve this problem. The Roman roads used deep crushed stone roadbeds as an underlying layer to keep them dry because water would flow out of the crushed stone rather than becoming mud in clay soils.

Improved roadways became necessary during the Industrial Revolution as a result of increased commerce. The issue was that rain combined with dirt roads resulted in commerce-impinging mud. The first modern highways were designed by John Loudon Mac Adam (1756-1836). He invented macadam, a low-cost paving material made of soil and stone aggregate, and he embanked roads.

Several feet higher than the surrounding terrain to allow water to drain away from the surface.

Various systems, such as cobblestones and wooden paving, had been developed over centuries to reduce bogging and dust in cities. Tar-bound macadam (tarmac) was used on macadam roads in cities such as Paris towards the end of the nineteenth century. Tarmac and concrete paving were extended into the countryside in the early twentieth century.

Road transport can be divided into two categories: transportation of goods and transportation of people. In many countries, licensing requirements and safety regulations keep the two industries separate.

Aside from the degree of development of local infrastructure, the nature of road transportation of goods is determined by the distance the goods are transported.

The weight and volume of each individual shipment, as well as the type of goods transported, are all factors to consider when transporting goods by road. Avan or pickup truck can be used for short distances and light shipments. A truck is more appropriate for large shipments, even if they are less than a full truckload (less than truckload). Cargo is transported by road in some countries using horse drawn carriages, donkey carts, or other non-motorized modes. Delivery services are sometimes classified separately from cargo transportation. Fast food is transported on roads by various types of vehicles in many places. Bike couriers are quite common for delivering small packages and documents within cities.

Rail Transportation

Rail transport is the transportation of passengers and goods via wheeled vehicles that are specially designed to run on rails.

alongrailways or railroads. Rail transport is a component of the logistics chain, which facilitates international trade and economic growth in the majority of countries.

Typical railway/railroad tracks are made up of two parallel rails, usually made of steel, that are secured to cross-beams known as sleepers (in the United Kingdom) or ties (U.S.). The sleepers maintain a constant distance between the two rails; a measurement known as the ‘gauge’ of the track. To keep the track aligned, it is either laid on a ballast bed or secured to a solid concrete foundation. The entire area is known as a permanent way (in the United Kingdom) or a right-of-way (North American usage).

When compared to road vehicles, railway rolling stock with metal wheels has low frictional resistance. Locomotives and powered cars, on the other hand, are typically

rely on the point of contact of the wheel with the rail for traction and adhesion (the portion of the transmitted axle load that causes the wheel to “adhere” to the smooth rail). While this is usually sufficient under normal dry rail conditions, adhesion can be reduced or even lost when unwanted material, such as moisture, grease, ice, or dead leaves, is present on the rail surface.

Rail transport is a component of logistics and is an energy-efficient and capital-intensive mode of mechanized land transport. Rails, along with other engineered components, make up a significant portion of the permanent way. They provide smooth and hard surfaces on which the train’s wheels can roll with minimal friction. A typical modern wagon, for example, can transport up to 125 tons of cargo on two four-wheel bogies/trucks (100 tons in UK). The contact area between each wheel and the rail is tiny, a few millimeters wide, which reduces friction. Furthermore, the track evenly distributes the weight of the train, allowing for significantly higher loads per axle / wheel than in road transport, resulting in less wear and tear on the permanent way. When compared to other modes of transportation, such as road transport, which relies on friction between rubber tires and the road, this can save energy. Trains also have a small frontal area in relation to the load they carry, which reduces forward air resistance and thus energy consumption, though this is not always the case.

Side winds must necessarily be reduced.

Rail transportation is a popular mode of public transportation in many countries because of its numerous advantages. In Asia, for example, millions of people use trains on a daily basis in India, China, South Korea, and Japan. It is also common in European countries. Outside of the Northeast Corridor, intercity rail transport in the United States is relatively scarce, though a number of major U.S. cities have heavily used, local rail-based passenger transport systems or light rail or commuter rail operations.

Rolling stock, or vehicles that travel on rails, is arranged in a linked series of vehicles called a train, which can include a locomotive if the vehicles are not individually powered. A locomotive (also known as a “engine”) is a powered vehicle.

It was used to pull a train of unpowered vehicles. Individual unpowered vehicles are referred to as cars in the United States. These can be used to transport passengers or freight. Passenger vehicles are referred to as carriages or coaches, whereas freight vehicles are referred to as freight cars in the United States and wagons or trucks in the United Kingdom. A railcar or a power car is an individually powered passenger vehicle; when one or more of these are coupled to one or more unpowered trailer cars as an inseparable unit, this is known as a railcar set.

Previous studies on the economic development of the United States focused on infrastructure, business climate, taxation, raw material cost and availability, labor, capital, market access, and so on.

When explaining the region’s growth, consider the climate.

Plaut and Pluita (1983) used labor and energy costs, availability and productivity variables, land and raw materials, environment, business climate, taxes, and government expenditures as explanatory variables in their state level analysis of industrial growth. They discovered that market accessibility, labor variables, land, environment, business climate, and propel1y taxes were all extremely important in explaining all three measures of industrial growth production, employment, and capital stock growth.

Carlino and Mills (1987) investigated the factors that influence county growth. County-level data were used to examine which variables influenced population and employment growth during the 1970s and 1980s. For total employment and population, as well as manufacturing, structural equations were estimated using a two-stage least-squares technique.

Since the manufacturing sector appeared to influence regional economic growth, employment and population have increased. Eight regional dummies were used to identify a county’s affiliation with a specific region. Population density, interstate-highway density, and family income were found to contribute significantly to the growth of employment density, whereas employment, interstate-highway density, family income, and the central city dummy contributed to the growth of population density.

Deller, Tsai, Marcouiller, and English (200 I) investigated the role of amenities in rural economic growth. In their study, economic growth was represented by three types of growth: population growth, employment growth, and per capita income growth. According to the findings of their study, higher levels of income inequality are associated with lower levels of population growth. Property

Taxation had a negative effect on population and income growth; population over 65 was negatively related to economic growth; climate had a strong influence on population growth levels; all amenity attributes, such as levels of water amenities, developed recreational infrastructure; and winter recreational activities were statistically significant and positively related to economic growth.

Government policies, particularly taxation and incentive policies, can have an impact on the firm’s decision-making process. Corporate income and property tax rates can have an impact on a company’s profits, either directly or indirectly (Gerking and Morgan, 1991). It is self-evident that a firm’s profits will suffer if the burden of a tax increase is borne directly by the firm. This study demonstrated that when taxes are raised, a company’s profits fall.

forward to the consumer. By passing the tax on to the consumer through higher prices, the firm’s market will decline, reducing profit indirectly.

Newman and Sullivan, on the other hand, argue that business taxes should not be viewed solely as an additional cost to the firm (Newman and Sullivan, 1988). They see business taxes as benefit taxes in part. “Firms benefit from local or state spending on fire, public safety, transportation, and possibly education” (Newman and Sullivan, 1988, p. 216). The pertinent question for the firm now is not which location would reduce the firm’s tax burden, but which location would provide the firm with the most desirable overall fiscal package.

Firms benefit from agglomeration economies in terms of cost savings.

that are concentrated in communities with a high concentration of manufacturing commercial business activity (Hery and Drabenstott, 1996; Johnson, 2001; McNamara, Kriesel, and Rainey, 1995). Concentration of activity provides greater access to markets, business services, and technological expertise. Furthermore, agglomeration forces are commonly associated with a plentiful supply of skilled labor. Communities in or near large Metropolitan Statistical Areas (MSAs) thus have a geographic advantage over smaller and more remote communities.

Agricultural agglomeration was highly significant and negatively related to gross county product, as expected, because agriculture is an industry that offers an alternative way of land use (Blum, 1982) Wages in agriculture are also typically lower than in other industries. Construction and retail employment agglomeration were insignificant.

In this study, infrastructure was represented by the concentration of roads, which was calculated as the number of miles in all roads divided by land area. This variable was highly significant and positively related to the GDP.

The variable number of person-trips per year represented the county’s ability to attract outside residents for business and/or personal activities in the area. This variable was chosen because of its relevance to business and personal travel and service utilization. The number of person-trips was highly significant and related to the gross county product in a positive way. According to the amenity index, rural amenities contributed to the county’s income growth.

Another finding of this study was that economic development was significantly and positively related to the level of education.

Human capital is scarce in the area. Among all variables, the coefficient for the percentage of the population with a high school diploma was the highest, followed by the coefficient for infrastructure. These findings suggest that counties seeking to boost income growth should ensure that they have a comparative advantage, or are at least comparable to competing communities in terms of human capital and infrastructure.

Large investments have been made in India to develop the transportation sector. As a result, transportation infrastructure and facilities have grown. There have also been notable qualitative advancements. These include the emergence of a multimodal transportation system, excellence training centers, and a reduction in the arrears of over-aged assets. Despite these impressive accomplishments, the Transport infrastructure has not been developed to the point where it can effectively address issues of accessibility and mobility for people and goods movement. Approximately 40% of villages have yet to be connected by all-weather roads. India has made significant progress in many areas while remaining regressive in others. Despite some bumps, the ongoing liberalization of the Indian economy has reawakened global interest in this dormant giant. In terms of real GDP at factor cost, Indian economic growth accelerated to 6.9 percent in 2004-05, up from 5.8 percent in 2001-02, 6.1 percent in 1999-00, 6.7 percent in 1989-90, 5.2 percent in 1979-80, and 1.0 percent in 1971-72. As a percentage of GDP, the combined gross fiscal deficit was

In 2004-05RE, the rate was 8.3 percent, compared to 9.9 percent in 2001-02, 9.5 percent in 1999-00, 8.9 percent in 1989-90, and 7.5 percent in 1980-81. The gross domestic capital formation at constant price (a proxy for domestic real investment) as percentage of GDP was 16.8 percent in 2004-05 as compared to 14.8 percent in 2001-02,18.2 percent in 1999-00, 35.4 percent in 1989-90, 76.9 percent in 1979-80 and 136.3 percent in 1971 – 72.

Indian Railways is one of the world’s largest railway systems. The rail system occupies a unique position in the country’s socioeconomic map, carrying approximately 1.1 million passengers and over 1.20 million tonnes of freight per day, and is regarded as a means and a barometer of growth. Rail is one example.

In 2004-05RE, the rate was 8.3 percent, compared to 9.9 percent in 2001-02, 9.5 percent in 1999-00, 8.9 percent in 1989-90, and 7.5 percent in 1980-81. The gross domestic capital formation at constant price (a proxy for domestic real investment) as percentage of GDP was 16.8 percent in 2004-05 as compared to 14.8 percent in 2001-02,18.2 percent in 1999-00, 35.4 percent in 1989-90, 76.9 percent in 1979-80 and 136.3 percent in 1971 – 72.

Indian Railways is one of the world’s largest railway systems. The rail system occupies a unique position in the country’s socioeconomic map, carrying approximately 1.1 million passengers and over 1.20 million tonnes of freight per day, and is regarded as a means and a barometer of growth. Rail is one example.

one of the primary modes of transportation for long-distance bulk freight and passenger traffic. It also serves as a major mode of mass rapid transit in the suburbs of major metropolitan cities. Railway route length increased by 0.4 percent in 2004-05, compared to 0.2 percent in 2001-02, -0.1 percent in 1999-00, and 0.4 percent in 1989-90. In 1979-80, it was 0.3 percent, and in 1971-72, it was 0.5 percent.

With a length of approximately 3 million kilometers, India’s road network appears to be quite extensive. It cannot, however, meet the accessibility and mobility needs of a country the size and population of India. The growth of road length was greater in all years than the growth of railway route length. It was

In 2004-05, the rate was 1.8 percent, compared to 1.5 percent in 2001-02, 0.8 percent in 1999-00, 3.3 percent in 1989-90, 3.2 percent in 1979-80, and 10.3 percent in 1971-72. It is also discovered that, while road length has been steadily increasing since 1999-00, railway route length has been steadily increasing since 2002-03.

The above trend indicates that rail and road route length growth is driving India’s real economic growth.

The following step is to divide the value added by transportation into the various modes. Goods-movement-intensive industries have less flexibility in the modes they use than economic development officials and transportation planners often believe. A careful examination of each industry’s logistics reveals which mode dominates the industry’s shipping.

patterns. The analysis may reveal opportunities for mode shifts, which could result in significant cost savings and/or increased productivity, but these are few and far between. The Alameda Corridor project in Los Angeles, for example, will almost certainly increase the amount of containers moving out of the Port of Los Angeles and Long Beach by rail significantly, but only as terminal operators increase on-dock rail capacity and only over time. Figure A-4 depicts the value-added from transportation by mode at the national level.

Continual shifts in the US economy toward more services, increased production of high-value and light-weight goods, expanded trade with Mexico and China, and the current pattern of global production and distribution systems have all had an impact over the last few decades. Freight transportation trends in the United States As the country’s economy shifted more toward services, the goods share of GDP fell in relation to total GDP. In 1970, goods accounted for 43 percent of US GDP, only slightly less than the 46 percent share of services in GDP today. However, by 2002, the share of goods in GDP had fallen to 33%, while the share of services had risen to 58%. Because freight transportation is more closely associated with goods production than with services production, the decline in the goods share of GDP contributed to slower growth in freight transportation (measured in ton-miles) over the last few decades than the overall growth of GDP. Between 1970 and 2002, real GDP in the United States was measured in 2000 chain-type units.

dollars increased by 167 percent During the same time period, ton-miles of freight transportation in the United States increased by only 73%. As a result, the US economy’s freight transportation intensity fell from 059 ton-miles per dollar of GDP.

Even within the goods-producing sector, the intensity of freight transportation has decreased. It took 2.1 ton-miles of freight transportation in 1970 to produce $1 of goods GDP. In 2002, half that amount, 1.1 ton-miles, was required to produce the same value of goods GDP (in real terms). This pattern reflects two fundamental changes in the US economy:

product downsizing toward lighter weight products (such as computers, cell phones, and handheld digital devices), and

Improved freight transportation system efficiency, not just in terms of speed.