Fact of the Week: British Road Projects Have Raised Firm Productivity by up to 3 Percent for Every 10 Percent Reduction in Time Previously Wasted on Travel

Infrastructure investments are key to long-term economic growth. For example, investments in transportation networks spur growth by decreasing the transportation costs of goods, improving market access for businesses located along key networks, and fostering more efficient innovation ecosystems.

By focusing on British road infrastructure projects launched between 1998 and 2008, four economists have estimated the impact these of investments on the British economy. They evaluated 31 major road projects and calculated changes in travel times before and after for firms located in the vicinity. The economists found that a 10 percent reduction in travel times increased the number of new firms and jobs surrounding these new networks by 3 to 4 percent. In addition, they estimated that for the average firm located around these new road networks, a 10 percent reduction in travel time to the firms raised productivity and wages between 2.5 and 3 percent.