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Anna Matas, head of the IEB’s new line of research into infrastructure and transport: “We need to implement a coherent method to evaluate the costs and benefits of investments”

The Barcelona Economics Institute has just launched a new line of research into infrastructure and transport. The aim of this new project is to analyse challenges such as the funding of infrastructure in the middle of the crisis, how to guarantee the profitability of plans and investments, and the setting prices for high speed trains and motorways.

The research will be led by Anna Matas, professor of Applied Economics at the Autonomous University of Barcelona and an acknowledged expert in the field.

-The IEB has opened up a new line of research into the economics of transport and infrastructure in order to prioritize themes of direct interest to society as a whole. Can you give us some examples of the kind of work that will be involved?

First, we have to apply economic criteria to evaluate the investment in infrastructure to ensure that the projects are selected are beneficial to society. Second, we must promote research into setting the prices that users should pay to use infrastructure, avoiding discriminatory treatment and guaranteeing fair competition. Price setting is closely related to the funding of infrastructure, an essential issue during a time of large-scale public budget cuts. A third key area is the research into the design of regulatory systems in the transport sector and the interrelation between regulation and competition. In the metropolitan area, we must study the relation between improvements in transport infrastructure and the processes of suburbanization and the decentralization of economic activities, processes that may generate high environmental costs and may also have a negative impact on the employment prospects of the least favoured sectors of society. All these issues have significant consequences for environmental sustainability.

– You have carried out a series of studies of infrastructure and transport from an economic perspective. One of your most recent studies analyses the effect of investment in roads on the productivity of businesses. What conclusions did you reach?

Corroborating other European studies, our research – carried out in conjunction with Dr Josep Lluís Raymond and Dr José Luis Roig – confirms that investments in road networks which reduce the time taken to link the principal markets have a positive and significant impact on the productivity of a region’s businesses. This effect is maintained when the impact of other variables that influence productivity (for instance, human capital) is controlled. But the study does not suggest that just any investment in the road network will have positive consequences – rather that the impact will depend on the importance of the markets being connected and the magnitude of the time reduction.

-Do the effects vary from region to region?

We do not yet have a definitive answer to this question. Nonetheless, in deciding on an investment there is a trade-off between efficiency and fairness. From the point of view of economic profit, there is no doubt that it is more efficient to build motorways in congested areas (which are more developed) than in uncongested ones (which are less developed). But if less developed regions do not have an adequate infrastructure provision they will be denied the chance to develop further. So a balance must be found.

— Does accessibility to the workplace affect income?

In metropolitan areas there has been a process of suburbanization and decentralization of workplaces which has led to an increase in the use of motor transport (both private and public) and in the monetary cost and time taken in travelling to work. Obviously, this cost increase means a reduction in the real incomes of families. Our recent research project carried out with Dr Raymond and Dr Roig confirms that difficulty in gaining access to public transport reduces the probability of finding work among groups less likely to have private transport – for example, women. In other words, the study concludes that for the metropolitan areas of Barcelona and Madrid the probability that a woman will find work depends positively on the time she takes to get to work using public transport (after discounting the effect of individual characteristics such as age and education). The higher the level of women’s education, the lower the effect.

— The crisis has paralysed a great deal of State-funded works and has slowed the execution of large-scale projects. From the economic point of view, does the lack of improvement in infrastructure and accessibility of a particular region affect its development?

Spain has achieved a high level of infrastructure in the context of Europe as a whole, and so we cannot expect additional improvements to generate a great impact on economic growth. Nonetheless, it is possible that in some parts of the country, and in the case of specific means of transport, there are problems of congestion which require investment. There is a margin for improvement in terms of the management of existing infrastructure and, in particular, with regard to setting prices at their optimal level. .

– In spite of the crisis, the EU has agreed to include the Mediterranean corridor as a priority measure. How will an infrastructure of this scale affect the development and the productivity of the area?

The impact of the Mediterranean railway corridor on goods transport will depend on the capacity of the rail services to offer attractive prices and quality to businesses. The railway is a highly competitive option for transporting large volumes of goods over long distances. For firms in the automobile and chemical sectors, for instance, rail transport offers major cost reductions, provided the system is efficiently managed. And in a scenario of rising oil prices, railways may be an attractive alternative for many businesses. Additionally, the connection between Mediterranean ports and the railways may have an impact on their activity and on the logistics sector as well. Overall, the corridor will help to decongest the road systems and will also offer environmental benefits.

— During the economic boom, Spain became the European country with the largest high speed train network. But some stretches of the network have proved to be totally unprofitable. Do you think the planning and the investment was efficient?

Given its high construction and maintenance costs, a high speed railway line needs a very high demand in order to be profitable: 10 million passengers a year, according to a recent estimate. In Spain, even the busiest lines are far from achieving this figure. We should remember that high speed trains offer other advantages that are difficult to quantify, but at present the Spanish network is unable to cover its operational costs, let alone the costs of the infrastructure investment. Clearly, the planning was not based on criteria of efficiency.

– In the present economic climate, in which public investments have been slashed and priorities must be set, what improvements in infrastructure do you think are essential in Spain?

I can’t draw up a list of infrastructure that should be prioritized. What I can say is that there is a need for a coherent method to evaluate the costs and benefits of investments above a certain amount. Obviously, this should not be the sole criterion when considering an investment, but it would indicate what are the costs and benefits of each project, and which social groups the project would favour. It should be borne in mind that the result of the evaluation will depend on pricing policy and therefore on decisions regarding the project’s funding.