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Economy benefits reviewed


06 July 2018

The DfT is commissioning new research into the relationship between transport investment and  agglomeration. 

Agglomeration is the spatial clustering of economic activity, seen in the formation of towns and cities and in how particular sectors of the economy concentrate in one place, such as  finance in the City of London and tech firms in Silicon Valley in the US. Researchers says agglomeration produces higher productivity for firms and higher wages for workers. 

The DfT introduced agglomeration effects into transport appraisal in the 2000s and the new research will update the evidence base, leading to new guidance on agglomeration elasticities. 

The first part of the project, an academic literature review by Dan Graham of Imperial College London and Stephen Gibbons of the London School of Economics, was published in May (LTT 25 May). It featured seven recommendations for further work. 

The Department plans to launch the procurement of a second phase of the project through an open competition later this month. The three-month project will: 

• investigate the treatment of heterogeneous agglomeration effects

• estimate separate localisation and urbanisation elasticities

• investigate the impact of wages and total factor productivity as a measure of productivity on the derived elasticities

• test the impact of the choice of connectivity metric on the size of elasticities

• explore the implications for elasticity estimation of using different measures of mass (population and employment) for effective density variables


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