The advantages of a high-speed rail – an example between Madrid and Barcelona

In 2008 a high-speed rail connection has been opened between Madrid and Barcelona shortening the time getting from one city to the other to 2 hours and 38 minutes. The main goals of the construction were the reduction in travel time on the corridor and the increase of capacity and safety conditions on the rail line (Frontier, 2011).

There are numerous changes that followed the launch of the HSR between Madrid and Barcelona. It shifts passengers from other transport modes, for example car, traditional rail and air (Dyjak et al., 2011). Constructing a new line between the two cities that are 600 km far from each other has a significant effect on air transport too (Rus, 2008). Previous to 2008 nearly 90 percent of the people travelling between Madrid and Barcelona went by air, but since the HSR has been built the number of passengers that go with train are increasing and even surpassing passengers going with planes. This trend is pointing towards a more environmentally friendly future as emissions per passenger on a high-speed train are approximately one-fourth of the emissions generated by flying by plane or driving a car. This is a great advantage as there is a growing public concern about environmental issues in Europe (Bachtler & Wren, 2005).

Lowering the emission of carbon dioxide is however not the main goal of most of the passengers who choose HSR to other means of transport. It is also more comfortable and convenient to travel with HSR. The train offers assigned reclining seats, computer outlets, movies, headsets, good food and gloved attendants to make people satisfied while travelling in these trains. Also, people can get to the station just 10 minutes before the departure unlike at airports, thus lowering the time spent on travelling. These are the main reasons why though it is not cheaper to travel by HSR than by plane between Madrid and Barcelona many choose this form of travelling (Rosenthal, 2010).

Also, polycentricism is a goal in Spain. As there is a low location index in Spain, with expanding the high-speed railway network the country tries to avoid concentration and centralization of the economic activity (Dyjak et al., 2011). The HSR line between Madrid and Barcelona has an impact on mobility, accessibility, socio-economic structure, urban image and spatial effects. These factors are considered to be significant but it is hard to quantify them in monetary terms (Frontier, 2011).

One of the most striking examples for the growing economic activity caused by HSR is the town of Ciudad Real located 120 miles from Madrid which has completely vanished because of the railway and the highway that bypassed the town. Now that an HSR station is located near the town and makes travel a lot less time-consuming, Ciudad Real has come alive as the HSR attracted a host of industries. Also, the University of Castilla-Lamancha has grown in size and importance too just because it is linked by the HSR (Catan, 2009).

Spain was always a top destination of tourists from all around the world. Now that more and more HSR lines are being built connecting cities all over the country it is easier not just for the workforce to be more flexible but also for the tourists to discover the cultural diversity of different Spanish regions (Raileurope, 2011). First, mostly business travelers were expected on the line between Barcelona and Madrid, but it is busy on the weekends too which means that Spanish people and tourists also use it to discover the cities. The government says that high-speed trains boost tourism which is the nation’s biggest industry and business travel. Also, constructing and maintaining a line make jobs for thousands of people. In the cities near the lines many companies that are involved in the different sectors of high-speed rail are investing in offices, plants and yards near the stations (Sheehan & Bee, 2012).

However, there are downsides too of the HSR line between Madrid and Barcelona. One of the problems is the corridor effect that shows the problem of the development of regions located between junctions of HSR lines. In these cases the infrastructure passes through the regions in between the stops without having much impact (Dyjak et al., 2011).

Moreover, the Spanish government wants to spend up to 77 billion dollars to expand and improve the lines while there is still an economic crisis.  When they built the Madrid-Barcelona line Spain it the economy was rising, but maybe now it would be wiser to cut the spending. Even if the number of passengers that choose HSR rises, the railroad system cannot cover its costs yet even between Madrid and Barcelona (Sheenan, 2012).

There are protests against the HSR too. A violent separatist group in the Basque country called Eta has launched an environmental campaign against the train. They even shot a local contractor in 2008 because he worked on the line (Tremlett, 2009). This shows that some people don’t want the country that is separated out somewhat to be intertwined (Catan, 2009), because they fear their independency and that they would assimilate to the rest of the country.

Nóra Szabó

References

Bachtler, J., & Wren, C. (2005). The evaluation of EU cohesion policy: Research questions andpolicy challenges.

Catan, T. (2009). Spain’s Bullet Train Changes Nation. The Wall Street Journal. 

Dyjak, R., Magda, I., Rosik, P., Zawistowski, J., Gapski, T., & Bienias, S. (2011). Evidence based Cohesion Policy and its role in achieving Europe 2020 objectives. In T. Gapski, S. Bienias, & E. Opalka (Eds.), . National Cohesion Strategy.

Raileurope. (2011). High Speed Rail News: Travel by High-Speed Train inSpain. High Speed Rail News.

Rosenthal, E. (2010). High-Speed Rail Gains Traction in Spain. The New York Times. Retrieved from 

Rus, G. D. (2008). The economic effects of High Speed Rail investment. OECD/ITF Joint Transport Research Centre Discussion.

Sheehan, T., & Bee, F. (2012). Economic impact of high-speed railvaries in Spain. San Francisco Chronicle.

Sheenan, T. (2012). Spain’s high-speed rail system offers lessons forCalifornia. The Orange County Register.

Tremlett, G. (2009). High-speed rail in Spain: From Madrid to Barcelonain a flash. Guardian.

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America and the mass migration in the late 19th century

In secondary school one of my favorite topics in history was the age of the European mass migration. It must have been so wonderful to sit on a huge steamship and cross the ocean to a country, where even a peasant could reach his dreams and where it was so easy to  buy land and start a whole new life. In the late 19^th century millions of Europeans made the journey to the New World, and it was possible exactly because of the steamships.

Compared to the early days of transatlantic trade, the travel costs sunk incredibly thanks to the appearance of steamships by the end of the 19^th century.  The price of a ticket to the States became cheaper relative to the European wages, but more importantly, the travel time declined from five to less than two weeks and besides, the steamships offered a safer voyage than any sail ship before them. The decline in the travel costs (both money and time) caused another phenomenon, which was that not all the immigrants stayed forever in the US, but more and more European returned to the Old World after some years of migration. This type of movement was very rear before the steamship became the most important vehicle between the two continents. Another important change was that at the end of the 19^th century, the bulk of the migrants were unskilled young people, so they had no superfluous knowledge, which on the one hand was useless in the US, and on the other hand took a lot of time and money to acquire in the home country. In other words the new migrants did not invest unnecessarily in their human capital, so it was easier for them to find suitable jobs in the New World.

Graph - Gross intercontitnental emigration from Europe, 1846-1939, annual averages; source: Chiswick & Hatton

If we put on the glasses of economics, the story of the mass migration to America may be more interesting. Looking through the lenses of geographical economics, we can say that the decline in the travel costs (both time and money) is actually a decline in transportation costs, and by the way the lack of knowledge on the side of the new immigrants can be considered as such too. This latter reduction, however, was possible before the time of the steamship, but come to a major role only from the end of the 19^th century.

On the first place, the decrease in transport costs meant that the economic competition between America and Europe could increase, which actually happened because the prices started to equalize between the continents. We can also put the steamships and their consequences on the migration in the context of the New Economic Geography. According to this theory there are two possible equilibria for an economy with two regions. Spreading is the one, when there are equal activities in both regions and agglomeration is the other, when all the activities are concentrated in one of the two regions. The most important factor which determines the equilibrium is the transportation cost. In case the transport costs are high, the spreading equilibrium will hold, because it is easier to produce in both regions instead of trading between them. We can say that this was the situation before the steamships: there was some migration, but the travel costs were so high, that even the higher wages of America were not big enough to attract more immigrants and to reach agglomeration. As steamships appeared and became able to cross the ocean, the agglomeration force grew stronger; the number of immigrants to the States soared. The smaller transportation cost meant that the wage differential between the New and the Old world became larger; therefore it was more tempting to travel to the US and work there. However, no total agglomeration could happen, because as the transportation costs declined, the prices started to equalize, which was also true for wages. The equalization of wages weakened the emerging agglomeration forces, which means that although the migration to America was huge at the end of the 19^th century, it could not approach the total agglomeration, because at the same time the force for spreading started to work.

All in all, we can claim, that the prediction of the New Economic Geography (that the decline in transport costs leads to agglomeration) was sort of true here, for a short period, but we have to treat this conclusion with suspicion. It is questionable if we can treat North-America and Europe as to regions, because it is highly unlikely that total agglomeration can ever happen in any of them. To find the truth behind the New Economic Geography in the time of the mass migration, we should rather focus on smaller parts of the receiver and sender areas. However, this is a tale for another post.

Fruzsina Mayer

Literature

Chiswick, B. R. & Hatton, T. J. (2005.) International Migration and the Integration of Labor Markets. In Globalization in Historic Perspective, edited by M. D. Bordo, A. M. Taylor and J. G. Williamson. 65-12. p. Chicago: University of Chicago Press

O'Rourke, K.H. & Williamson, J.G. (1999.) The Heckscher-Ohlin Model Between 1400 and 2000: When it Explained Factor Price Convergence, Ehen it Did not, and Why. Papers 99/25, College Dublin, Department of Political Economy.

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Addiction to Ryanair

by Vija Pakalkaite

A Ryanair story takes place in a tiny airport of Kaunas which is the second largest city in Lithuania. This story could be compared to drug addiction in such a way that it provides euphoria (region is quickly developing), but has its costs (the “health” of a country Lithuania is weakening – people are emigrating).

Short history

Ryanair came to Lithuania in 2005 and chose Kaunas airport to operate. Due to an economically successful launch in 2005, in 2010 Ryanair decided to establish an airplane base in Kaunas airport, which means, that planes not only land-take passengers-leave, but also stay overnight. In addition, Ryanair announced its plans to establish an aircraft technical maintenance center in Kaunas in years to come.

In May 2011 Ryanair announced a very unpleasant surprise to the Kaunas airport (but pleasant to the residents of Vilnius), by announcing it will begin to provide flights from the capital city Vilnius airport as well. However, once a dull and uninteresting Kaunas airport now is full of life. It is planned that in 2011 this airport will serve around 850,000 passengers.

What to expect

Theoretically, if transportation costs are high, the spreading forces would dominate and different sites would try to do all economic activities within the teritorry instead of importing some. As transport costs fall, agglomeration forces will take over. It becomes possible to take advantage of a scale economy and then transport good cheaply to the other sites. This could be applied to the transportation of labor force as well. When flights become cheaper  people would use them to move to the larger cities which already have many residetns and labour. The entry of Ryanair to the Lithuanian airline market was one example of rapidly falling transportation costs to the consumer.

In addition, one of the features of the low-fare airlines is that they choose airports that are not of primary importance to provide their services. Such airports usually charge airlines with no or low fare and expect to gather benefits by providing additional services to the travelers. So they expect that the regional economy around the airports will expand, and airport facilities as well would be expanded.

Special shuttles soon were established

Until Ryanair‘s decision to fly from Vilnius,Kaunas airport was the only „window“ to the world where one could catch a low-fare airplane in Lithuania. As a result, all  passengers who wishedto use Ryanair had to reach Kaunas airport first. This was not so easy for passangers especialy during the night. The entry of Ryanair increased the demand of easing possibilities to reach Kaunas airport, and the supply was subsequently provided.

Special shuttle services were soon provided both in between Kaunas airport and Kaunas city, as well as other largest cities, including Riga which is the capital of Latvia. The former shuttle takes people from the Kaunas airport and brings them to hotels and other places in the Kaunas city then back to the airport. It is a special bus route which schedule is adjusted to the flight schedule. Besides, a “special prolonged stop” in the shopping town “Urmas” with more than 70.000 square meters of retail space was incorporated in the route of the shuttle service. The latter ones, for example, a Lithuanian shuttle taxi operator „Ollex“ bring passengers from Vilnius directly to Kaunas airport (price 11 EUR) and from the seacost city Klaipėda too (price 18 EUR), the schedules of the shuttle are as well tied to the schedules of the Ryanair flights.

Regional development

There were new cafeterias  established in the vicinity of Kaunas airport, some of them even in local residencies. A pizzeria was opened and a couple of bed-and-breakfast places in a nearby disctrict. Near the airport a shopping center is being built as well as a hotel inside the Kaunas airport. When Ryanair opened a base in Kaunas airport in 2010, Kaunas hotels became booked 80% of the time. In the city of Kaunas itself a bunch of new bars was opened, and the existing bars are full of foreigners.

Establishement of Ryanair base also revitalizedthe flat rent business in Kaunas, because pilots and fligh crews  are  renting flats in Kaunas. There are 100 employers in the base, and it is calculated that the establishment of the base directly or indirectly created a thousand of work places in the region.

How Lithuanians “agglomerated” London

However, not everything was so picture perfect. Once a nation of 3.5 million Lithuania now has just 3, 045,000 residents. The country in ten years since 2001 lost 12% of population, out of which 76% because of emigration. The acceptance to the European Union, visa-free Schengen zone and low-fare airlines decreased the price of travelling. During ten years, the region of Kaunas lost around 13% of its residents – similar to the entire average of Lithuania. Most popular destinations to emigrate for Lithuanians are United Kingdom, Ireland, Spain, and now, since it opened borders to the labor from new EU members, Germany. It is believed, that in London and nearby it around 100,000 Lithuanians are settled.

This being said, Ryanair routes are adjusted to the emigration habits of Lithuanians. There are 15 routes from Kaunas, out of which 8 fly to various destinations in the UK, one in Ireland, and one in Germany. The rest half dozen of flights go to the Netherlands, Belgium, Norway, France and Finland which could be considered to be more for tourism.

Short conclusion

Ryanair entry to Lithuania via Kaunas indeed gave positive stimulation to the economy of the Kaunas region, but many of the economic activities are directly related with the presence of Ryanair itself. If this airline ever decided to leave Kaunas airport many of the positive effects would soon disappear. Ryanair could have contributed as transportation means for many of the Lithuanians to emigrate and it still does so. However, if not as a result of this airline, a Lithuanian who truly wanted to leave the country would find a way to do it. 

When Irish low-fare company Ryanair decides upon the routes it probably first thinks about the profits it will earn, and only then about the impact to the economy of a region or a country. In this photo you can see the author of the blog post and Ryanair CEO Michael O'Leary in 2010, when he decided to establish a plane base in Kaunas airport.

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