Two econometric models were built to test the effects of reduced travel time between regions within New Zealand.
A gross value added (GVA) model showed productivity was positively related to population density and to accessibility to international airports across New Zealand.
A spatial computable general equilibrium model built for a subset of these regions near the major city of Auckland enabled estimation of the spatial and employment effects of both the direct time savings achieved in a road improvement and the subsequent productivity improvement derived from the GVA model.
The findings included that road improvements favoured residence and work in the major centres, albeit this advantage was reduced by the productivity improvements, that marginal gross domestic product (GDP) and utility gains as a result of the road improvement would be higher with population growth and that utility effects exceeded GDP and employment effects.
These results confirm for a scenario of changing land use that there can exist benefits from a transport improvement that exceed those measured by the standard transport cost-benefit analysis, even with the current NZ Transport Agency add-ons for wider economic benefits. However, these situations are likely to apply only to large projects.
Keywords: agglomeration, computable general equilibrium (CGE) model, gross value added (GVA), imperfect competition benefits, increased competition benefits, job relocation benefits, labour supply benefits, methodology, model, New Zealand, productivity, regions, scenario modelling, spatial effects, specialisation benefits, transport, wider economic benefits (WEBs)