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50 C H A P T E R 6 Economic Factors Background Literature or program selection. Thus the results of these methods, which rely on performance measures of other types (e.g., mobility Transportation investments have the potential to affect net through monetized travel-time savings, safety through crash economic growth and spatial and temporal distributions of reductions and associated costs) may themselves be considered wealth. They influence the economy not only by affecting economic performance measures: user costs such as energy consumption, vehicle maintenance, accident frequency, and travel time, but also business costs Life-cycle cost; associated with inventory, logistics, reliability, just-in-time Life-cycle benefit; processing, and fluctuations in market areas for workers, cus- Net present value; tomers, and deliveries. But financial resources are always lim- Rate of return; ited, thus it is important for decision makers to consider Benefit/cost ratio; economic costs and benefits of potential projects and pro- First-year benefit ratio; and grams and select those that maximize the positive outcomes Payback period (FHWA, 2003; Lewis, 1991; AASHTO, 1977). to the greatest extent possible (Lakshmanan and Chatterjee, 2005; Weisbrod et al., 2001; Lewis, 1991). A separate set of performance measures is relevant to eco- There are two types of costs and benefits: those that accrue nomic development impacts. For example, studies worldwide to users of the system, and those that accrue to the economy have shown greater access to larger employment markets at large. Methods for identifying user costs include life-cycle increases the potential for people to earn higher incomes, cost analysis and benefit/cost analysis (BCA). Methods for thus improving metropolitan economic performance. Mea- determining cascading impacts throughout the wider econ- sures of accessibility to jobs have been suggested as proxy omy, known as economic impact analysis (EIA), vary with indicators for economic growth (Cox, 2007). Other common complexity. Simple methods for EIA include surveys, market measures of regional economic development include: studies, and comparable case studies. More complex methods include econometric productivity models and input/output Jobs created; models. The most advanced economic impact assessment mod- Gross regional product (GRP); and els integrate with travel demand models, land use models, and Change in personal income. dynamic simulation economic models. Several reports review the importance of economic analysis and present technical Regional economic development benefits can be incorpo- methods, best practices, and pitfalls to avoid. (FHWA, 2003; rated into the economic impact measures described above Lewis, 1991; AASHTO, 1977; Weisbrod and Weisbrod, 1997). (i.e., on the benefits side of the equation) although caution The Economic Development 2002 Conference (TED2002) must be used to ensure that benefits are not double-counted was devoted to these and other topics related to transporta- with other benefits such as mobility/travel-time savings. tion economics, including rural travel, freight movement, decision-making techniques, and joint development efforts Key Findings (Roskin, 2003). The methods used to determine economic impacts result The remainder of this section examines important trends with in performance measures that aid decision makers in project respect to economic impacts of transportation investments.