Abstract
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.
| Original language | English |
|---|---|
| Journal | Journal of Transport Economics and Policy |
| Volume | 42 |
| Issue number | 1 |
| Pages (from-to) | 23-42 |
| Number of pages | 20 |
| ISSN | 0022-5258 |
| Publication status | Published - Jan 2008 |
