Transportation and Economic Development

Like many economic activities that are intensive in the use of infrastructures, the transport sector is an important component of the economy impacting on development and the benefit of populations. A relation between the quantity and quality of transport infrastructure and the level of economic development is apparent. When transport systems are efficient, they provide economic and social opportunities and benefits that result in positive multipliers effects such as better accessibility to markets, employment and additional investments. When transport systems are deficient in terms of capacity or reliability, they can have an economic cost such as reduced or missed opportunities and lower quality of life. Efficient transportation reduces costs, while inefficient transportation increases costs. The impacts of transportation are not always intended, and can have unexpected or unintended consequences such as congestion.

Transport also carries an important social and environmental load, which cannot be neglected. The added value and employment effects of transport services usually extend beyond employment and added value generated by that activity indirect effects are salient. For instance, transportation companies purchase a part of their inputs from local suppliers. The production of these inputs generates additional value-added and employment in the local economy.

 The suppliers in turn purchase goods and services from other local firms. There are further rounds of local re-spending which generate additional value-added and employment. Similarly, households that receive income from employment in transport activities spend some of their income on local goods and services. These purchases result in additional local jobs and added value. Some of the household income from these additional jobs is in turn spent on local goods and services, thereby creating further jobs and income for local households. As a result of these successive rounds of re-spending in the framework of local purchases, the overall impact on the economy exceeds the initial round of output, income and employment generated by passenger and freight transport activities.

 Related impacts the outcome of economic activities and firms partly relying on efficient transport services for both passengers and freight. For instance, the steel industry requires cost efficient import of iron ore and coal for the blast furnaces and export activities for finished products such as steel booms and coils. Manufacturers and retail outlets and distribution centers handling imported containerized cargo rely on efficient transport and seaport operations.

 

Mobility is one of the most fundamental and important characteristics of economic activity as it satisfies the basic need of going from one location to the other, a need shared by passengers, freight and information. All economies and regions do not share the same level of mobility as most are in a different stage in their mobility transition towards motorized forms of transport. Economies that possess greater mobility are often those with better opportunities to develop than those with scarce mobility. Reduced mobility impedes development while greater mobility is a catalyst for development. Mobility is thus a reliable indicator of development.