From Social Savings to Spatial Equilibrium: Evaluating Transportation Improvements in Quantitative Spatial Models

<jats:p>How do we evaluate the welfare gains from transport infrastructure investment? We present a quantitative spatial framework that integrates traffic and economic responses to infrastructure improvements and derives the elasticity of aggregate welfare to changes in the transportation network. The resulting formula extends the traditional “social savings” method to incorporate route and mode choice, agglomeration and dispersion externalities, and traffic congestion. We apply the formula to the U.S. freight network and assess the benefits of reducing costs on each segment of the U.S. Interstate Highway System. The traditional and extended measures are closely related overall, but they differ in the level of estimated gains and in the ranking of some highly valued links. Where the rankings differ, network position determines how congestion and spatial adjustment alter a link’s measured benefit.</jats:p>