Tinbergen Revisited : Benefits from Infrastructure Investments in an Open Economy

• In his seminal work, Tinbergen (1957) studied the impact of an infrastructure improvement on the transport cost of existing traffic and on the national product. In a numerical example it was shown that the national product could increase substantially beyond the value of the reduced cost of transportation on the improved link. This difference has been labelled the Tinbergen multiplier. Since the modelled economy was thought of as a first best case, the result has been used among those arguing that transport investments give rise to substantial spill over effects in the economy. However, the result is in contradiction with later results within multimarket welfare analysis under first best assumptions. In this paper we recalculate Tinbergen's model and show that the spectacular result is heavily dependent on the localisation of the transport sector. Hence, our results are of utter importance for today's models of infrastructure assessment.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

Infrastructure investments

spatial cost-benefit analysis

multimarket welfare analysis

Tinbergen multiplier

nationalekonomi

Economics

Publication and Content Type

vet (subject category)

rap (subject category)