Cost benefit analysis of a transport improvement in the case of search unemployment

TY - JOUR

T1 - Cost benefit analysis of a transport improvement in the case of search unemployment

AU - Pilegaard, Ninette

AU - Fosgerau, Mogens

PY - 2008/1

Y1 - 2008/1

N2 - We examine the implications of search unemployment for the evaluation of a transport investment in a conventional cost benefit analysis (CBA) assuming perfect competition. Lower transport costs induce search over a larger area and longer commuting distances. The expected duration of vacancies is reduced with ensuing benefits outweighing the loss to increased transport. The search imperfection drives a wedge between the marginal product of labour and the wage, such that the final benefits of a transport improvement exceed those of a conventional CBA. Using a simulation model we find these additional benefits may be substantial.

AB - We examine the implications of search unemployment for the evaluation of a transport investment in a conventional cost benefit analysis (CBA) assuming perfect competition. Lower transport costs induce search over a larger area and longer commuting distances. The expected duration of vacancies is reduced with ensuing benefits outweighing the loss to increased transport. The search imperfection drives a wedge between the marginal product of labour and the wage, such that the final benefits of a transport improvement exceed those of a conventional CBA. Using a simulation model we find these additional benefits may be substantial.

UR - http://www.scopus.com/inward/record.url?scp=38949088628&partnerID=8YFLogxK

M3 - Journal article

AN - SCOPUS:38949088628

SN - 0022-5258

VL - 42

SP - 23

EP - 42

JO - Journal of Transport Economics and Policy

JF - Journal of Transport Economics and Policy

IS - 1

ER -