PowerPoint-presentatie

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Modeling the spatial pattern of economic
activities in the New Economic Geography
II Mark Thissen
Lecture 1 11.15 12.45 July 4, 2007 Dimetic
workshop Pécs, Hungary
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Contents

• Case 2 The case of terrorism
• More about the model How does it work
• Sector development is very different within the
  region
• Case 3 The case of Road pricing
• Welfare theory revisited
• Shortcomings of general equilibrium theory How
  to evaluate partial policy?

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The case study Brienenoord Bridge Rotterdam
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How Does RAEM work I Infrastructure
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How Does RAEM work II Trade and product markets
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Indirect costs of Terrorism

• Maximum Costs
• Rebuilding Bridge
• Temporary misallocation
• Permanent prevention policy change
• Analysis short run model without migration
• Alternative Costs?
• Not re-building the Bridge
• Analysis long run model with migration?

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Effect on Production and Welfare
Cost190 million every year Rebuilding costs 350
million!
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Conclusions

1. Rebuild the Bridge!
2. Economic effects can be substantial
3. The effect are very different on a sector level
   if compared to the effects on a regional level.
   Agglomerations are not good for everybody!

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RoadPricing Research questions

• How to determine the indirect economic effects of
  road pricing?
• With respect to Agglomeration economies
• Not with respect to safety or environmental
  issues
• Where are the largest Indirect Cost and benefits
  due to agglomeration economies?
• How large are these indirect economic effects
  due to agglomeration economies (see also lecture
  1)?
• What are the policy implications?

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Welfare Theory Benefits to users and owners
infrastructure
Road pricing
Infrastructure Investment
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Road pricing Problem Indirect Effect of
Transfer in SCGE
Propose a four Step Approach

• Determine General Indirect Effect Multiplier
  (SCGE)
• Total effects divided by direct effects (change
  in generalised costs) due to accessibility
  changes (Lecture 1)
• Determine Direct Effect (demand curve) and change
  in Generalized Costs (travel time and distance)
• Transfer is included in direct effect !
• Change in generalized costs represents
  accessibility change
• Determine Indirect effect
• Multiplier times change in generalised costs
• Determine total effect

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The Netherlands (2020) Generalized costs change
due to Congestion Charge on congested roads.
Commute Large Positive
Freight Small Negative (Results not discussed)
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Indirect effects Commuting Multiplier

• Strong agglomeration economies in Randstad
• Amsterdam
• Rotterdam
• Utrecht

• Mainly within Regions
• - labour remains in region
• Negative effects
• Pushing labour out of agglomeration Wasteful
  commuting

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Direct benefit and generalised costs
Commute Related and both are positive
Direct Benefit
Change Generalised costs
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Indirect benefits

• On relations sign opposite from direct benefit

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Welfare effects of a congestion charge Indirect
versus direct benefits
  Freight Commute
Direct welfare effect travel time gain 104 141
Direct welfare effect quantity change 0 -6
Totaal direct welfare effect 104 135
Indirect intra-region welfare effect -2 -44
Indirect intra-region welfare effect 3 85
Total indirect welfare effect 1 41

• Indirect effects are substantial
• Can be positive or negative depending on whether
  they are agglomeration or dispersion augmenting
• Congestion charging has also negative indirect
  effects (intra versus inter corop)

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Conclusions

1. Indirect effects are small for freight
2. Congestion charging can have negative indirect
   effect if it is dispersion augmenting
3. The negative effects are especially strong for
   commuting in congested areas
4. Policy In those cases that congestion charging
   has negative indirect effects new infrastructure
   may be preferred