Wednesday, December 21, 2011

Why are Transport Projects so Important for Our Economic Development?

By Evgenia Ivanova

As the US President Barack Obama has once said: “A major new high-speed rail line will generate many thousands of construction jobs over several years, as well as permanent jobs for rail employees and increased economic activity in the destinations these trains serve.” The quote is indeed true and it made me think how we rarely have the chance to stop for a moment and consider the positive economic benefits of transport projects. Their tremendous impact on the way we live not only shortens the distance and brings us close together but they also alter our environment through agglomeration formation. The high-speed rail (HSR) serving the road between Cologne and Frankfurt in Germany is an excellent example to illustrate my point.

Opened for the first time in 2002 as an Inter-City Express (ICE) high-speed passenger dedicated line, it serves the 177 kilometers distance between Cologne and Frankfurt. With trains running at a speed of 320 km/h, this ICE has reduced the rail time from 2h 15 min to just a bit over an hour for the non-stop services. Less than ten years after the first train started operating, there are plenty of evidence for the positive effects that the ICE line brought for the regional development and the labor markets of the smaller towns interconnected by the service.

Evidence of Agglomeration Formation and Development Impacts

With the construction of the line we observe an increased intra-regional accessibility, where the cities form a band and each city pair is no more than 40 minutes away from each other, thus giving the opportunity of daily commuting. A number of recent studies have analysed the economic effects of better transport accessibility as a result of high speed rails and concluded that there is a tendency of 0.25% growth in GDP for any 1% increase in market access. The existence of the HSR has indeed confirmed the results of these studies and transformed the region by boosting its economic growth and allowing for agglomeration formation (Figure 1).

Figure 1

The most remarkable was the regional economic transformation of the two intermediate stations Montabaur and Limburg on the route. The two cities are located exactly between two major agglomerations - the Rhine-Main area and the Rhine-Ruhr conurbations – and each of them has become more reachable to the traditional employment center-cities Cologne, Frankfurt as well as Wiesbaden. Despite the proximity of the regions around Montabaur and Limburg to large metropolitan areas, until the opening of HSR in 2002, they have preserved their rural character, with high quality of life and affordable land and rent prices. Several months after the beginning of the train services the regions started growing in migration attractiveness due to the lower prices of living there and the lower costs of commuting to the megalopolis cities.

Since Frankfurt is the main employment market in the region and an important hub on the road, which has a better connection and more frequent services especially during rush hours, it attracts the majority of commuters from Montabaur, Limburg and the surroundings. I should mention here that 80% of daily commuters from Limburg and about 60% of commuters from Montabaur travel to Frankfurt using the ICE line. Also a significant number of people chose to reallocate to the smaller towns from the neighboring large agglomerations, which strengthens the recent trend of people moving from the core metropolitan areas to the periphery, seeking higher quality and lower land prices and at the same time having the advantages of shorter and cheaper commuting to their work places.

The impact of the HSR on Montabaur, Limberg and the surrounding regions has been indeed positive. The population gains through the migration of new residents are tremendously important and beneficial, having in mind the demographic problems which Germany, similar to the rest of Europe, is facing nowadays.

Since the line is relatively new, functioning for less than 10 years, there is still no economic boom observed in the regions connected by it. However, the significance of the urbanization tendencies, the residential migration and the increase in the real estate prices as a result of it, give positive prospects and make us optimistic about the future development of the cities.


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