Failure of the M3-M30 motorway?
by Áron Iker
The
Hungarian government aimed to positively affect the regional development of the
agglomeration of Miskolc by constructing a motorway between the capital and the
city. However, the reduction in
transportation costs between Miskolc and Budapest supposedly has driven to an
equilibrium where Miskolc faces with negative agglomeration forces, so the
construction of the motorway has had an adverse effect than expected.
The
construction of the M3-M30 motorway in Hungary started in 1978 and after long
offset periods it eventually reached Miskolc, one of the biggest Hungarian
cities. The project had clear goals which were declared by the Hungarian
governments. Firstly, it aimed to reduce the congestion on the Road 3 which
turned over large cargo and personal traffic. Secondly, the government expected
a significant development in the region around the track of the motorway. After
the beginning of the 90’s when the artificially sustained heavy industry and
mining ceased or rapidly declined, these areas became the poorest ones of the
country. Along many economists’ suggestion that infrastructural improvements
(through reducing transportation costs) boost the economic prosperity of a
given region, politicians had large hopes for the opening of the highway. To
sum it up, the goals of the new motorway were focused on lowering both
transportation costs and congestion.
In the
core model of new economic geography transport costs play a substantial role in
the determination of location equilibrium. Construction of a motorway lowers
transport costs directly – primarily by higher speed and consequently by less
time required for transportation. Congestion can be also considered as a factor
that increase transport costs – mainly by time loss and additional hiring
costs. By reducing congestion we can also diminish transportation costs. The
core theory of new economic geography says that in the presence of high
transport costs the unique stable equilibrium is spreading and the reduction of
transport costs mainly drives agglomeration forces. In the extended version of
the model, where there are vertical linkages between firms, the Bell curve says
us that incomplete agglomeration can be also a stable equilibrium and under low
values of transport cost we can observe again spreading equilibrium. It is
obvious that the result of opening a new motorway is highly depends on the
initial state of equilibrium.
While
the M3-M30 motorway connects Miskolc with Budapest (and of course with
West-Hungary) we can describe it with a two-region model where the agents
decision is whether serving the demand of Miskolc by transportation
(agglomeration) or establishing local firms (spreading). The aim of the
government was the enhancement of the second one. However, if the equilibrium
was on the right side of the Bell-curve (the previous history of the region
suggests this version), the motorway construction would have negative
agglomeration effects in Miskolc.
According
to the empirical evidences the decline in the transport costs resulted in a
shift toward agglomeration. Firstly we can review the traffic-count data. ( I have chosen Emőd - and in earlier years Vatta - for observations, because here we can find data about the traffic of the Road 3 as well as the M30 motorway, and it is close enough to Miskolc that we can suppose that almost all of the traffic reaches it but there is just negligible local traffic.) It clearly indicates that one of the government’s goals has been fulfilled:
congestion sunk significantly. The average daily traffic on the road 3 toward
and from Miskolc accounted for 10514 vehicles in 2002 (directly before the
opening of the M30 motorway) and 3879 in 2010. The shaping of the traffic also
can sign whether agglomeration forces actuate or not. As Graph 1 shows the
daily cargo traffic toward and from Miskolc permanently grew. (In order to eliminate distortions originated from measurement imperfections every data are the averages of 3 years.) It can sign that
it worth for firms to satisfy demand in Miskolc by transport and also that
Miskolc becomes an agglomeration where firms export from.
The
conclusions of Németh (2006) highly support that the process which evolves is the
first one. He shows that the construction of the M3 motorway to Polgár (and the
M30 to Emőd) has had no significant effect on the wage levels (which grows if
agglomeration evolves) and on the unemployment rate (which usually falls due to
the more workplaces in the agglomeration). The only indicator where improvement
is observable is the density of firms (all of the data are related to the
Hungarian average). However, this indicator depends not only on the number of
firms but also on the size of the local population. According to the data of
the Hungarian Statistical Office (KSH) the population of Miskolc accounted for
185,567 in 2000 while only 166,823 in 2010. Consequently the growth in the firm
density does not sign the evolving agglomeration. Other KSH data confirm that
in Miskolc we can observe negative agglomeration trends. As Graph 2 shows after
2004 (when the motorway reached Miskolc) the number of operating firms in the
city began to decline.
On the
whole we can say that the reduction in transportation costs between Miskolc and
Budapest supposedly has driven to an equilibrium where Miskolc faces with
negative agglomeration forces, so the construction of the motorway has had an
adverse effect than expected. The most important consequence of this story is
that reducing transportation cost is not always useful for the aimed region,
especially if it does not couple with other sufficient measures.
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