Assessing the Value of Market Access from Belt and Road Projects
This paper describes a parsimonious approach to the economic analysis of transportation investments
Abstract
This paper describes a parsimonious approach to the economic analysis of transportation investments. In a gravity model of trade, project benefits may be summarized by a money metric for the change in market access experienced by all cities due to the investment. This metric is equivalent to the change in the value of all payments to urban land—the fixed factor of production. Using this model and an original geographic information system data set of Belt and Road Initiative projects in Eurasia, the paper predicts additional income paid to owners of urban land, for each project and city. Individually, nearly half of the proposed infrastructure is estimated to provide significant gains; however, the rest is estimated to be of little value because it fails to create new least-cost paths between large populations centers. Considering the proposed new transport infrastructure as a system, the share of projects that provide gains increases to almost two-thirds. While gains in market access accrue primarily to low-income countries, gains from many projects accrue outside the project country, and in dollar terms more so to richer countries. This finding is consistent with the idea that infrastructure investment along international trade corridors can be a public good. These estimates should be taken as lower bounds, because they do not include direct benefits to users, for instance, time savings. Even so, they offer a useful way for governments to estimate the short-run gains from infrastructure and prioritize infrastructure spending.
This is an output of the World Bank’s Strategic Research Program
Citation
Reed, Tristan; Trubetskoy, Alexandr. (2019). Assessing the Value of Market Access from Belt and Road Projects. Policy Research working paper;no. WPS 8815 Washington, D.C. : World Bank Group.
Link
Assessing the Value of Market Access from Belt and Road Projects