Agglomeration Benefits and Transportation Projects: Review of Theory, Measurement, and Application

Traditional project appraisal assesses benefits from a number of sources, including improvements in safety and reductions in noise levels, travel cost, and travel time. In most cases, benefits are primarily based on travel time savings. Project appraisal based primarily on travel time savings systematically underestimates the benefits of projects that create economic benefits beyond travel time savings and thereby introduces systematic bias against investment in an important subset of initiatives, particularly in projects large enough to alter the time–space geography of a metropolitan area. Recent research has developed methodologies to capture some of these previously overlooked benefits of transportation projects, most notably agglomeration benefits. While methodologies now exist to measure agglomeration benefits, their inclusion in project appraisal is limited, partly because agglomeration and its sources are not well understood. This work explains agglomeration through a review of previous research on the sources of transportation benefits and appraisal methodologies. This study also reviews the agglomeration calculations of a number of projects and specifically highlights projects in London; Melbourne, Australia; and Tel Aviv, Israel.