"An important policy question facing many countries is whether improving road quality to peripheral and isolated locations will reduce transport prices and improve physical connectivity. If so, investments that favor spatial equity in transport coverage need to be weighed against investments that are most effective in improving overall efficiency of the transport market. Since network-wide impacts from a particular infrastructure improvement could well have unexpected or non-linear impacts across the country, due to endogenous demand and congestion effects or due to the physical idiosyncrasies or particularities of the (asymmetrical) road network, estimating or evaluating these likely effects is very important. To address these issues, the World Bank hired NORC to gather extensive transport cost data and create an econometric model in a Geographic Information Systems (GIS) database to decompose the components of nation-wide transport costs in both Egypt and Sri Lanka, estimate coefficients for those effects in an econometric model, and then use the model to simulate future nation-wide impacts on transport costs of alternative infrastructure improvement scenarios. Such considerations are rarely quantitatively evaluated by road planning departments. For example, most road improvement options are typically evaluated by government road departments or international agencies using Economic Rate of Return (ERR) models that consider transit costs of vehicles traversing particular road segments. In these models, network-wide effects of that road improvement are not explicitly modeled or considered. Yet, as with any other network, these effects can be wide-ranging, non-linear, and endogenous with demand, competition, congestion and government policies.
In Sri Lanka, NORC worked with World Bank economists to create a spatial-econometric model that quantitatively decomposed drivers of shipping prices and transport costs, and then simulated network-wide impacts on shipping prices under a range of alternative road improvement scenarios currently being considered by the Sri Lankan government. Using highly-detailed Geographic Information System (GIS) road data provided by the government of Sri Lanka, including the complete road network of Sri Lanka in GIS format provided by the Sri Lankan Road Development Authority (RDA), as well as nation-wide data on traffic congestion variation, variation in road surface quality (including International Roughness Index (IRI) data and measures of Vehicle Operating Cost (VOC)), physiographic data including topographic variation and land cover, and detailed spatially explicit data on per capita incomes and consumption patterns from Sri Lankan government surveys and censuses, NORC constructed an extensive GIS database for integration of the data in a precise geographic road network framework. In addition, NORC advised the World Bank on the conducting of an extensive survey of transport and shipping prices across Sri Lanka, to capture spatial variation in transport costs as a function of actual transport costs through the infrastructure network, economic demand and traffic congestion. The data from the transport and shipping price survey served as the dependent variable in the GIS/econometric model for estimation of quantitative coefficients of components of nation-wide and network-wide transport costs. The model simulated price impacts at the district, provincial and national levels, and calculated country-wide savings on shipping and transport expenditures. A range of alternative infrastructure improvement scenarios currently being considered by the Sri Lankan government were digitally integrated into the GIS model, and the econometric model estimations were used to estimate future impacts on nationwide transport costs of alternative infrastructure improvement scenarios. Quantitative cost-benefit analysis of the results of the scenario simulations were conducted, to estimate relative costs and benefits in US dollar terms.
NORC provided key expertise in GIS, transport modelling, survey design and econometric model design. The study was quite innovative, as very few integrated spatially explicit econometric estimations of the components of nation-wide transport costs that specifically modelled the entire infrastructure network have been conducted. The results indicated that improvements in more congested areas tended to have superior network-wide cost savings, across all of Sri Lanka, than improvements to connect “lagging” areas. The study has been distributed by the World Bank as a Working Paper, and is available for download from the World Bank website.
A similar study, following the same research methods, was conducted in Egypt, with similar findings.