Economic Impact of Upgrading Roads

Principal Investigator:

David Levinson, Professor, Civil, Environmental and Geo-Engineering

Project Summary:

Improvements to transportation networks, especially those in growing areas, tend to have impacts on local land markets. In principle, an improvement to a network link will confer economic benefits to adjacent and nearby properties. Depending on the type of improvement (construction of a new link, capacity addition to an existing link, or upgrading an existing link), the benefit could represent a reduction in the time-cost of travel or other variable costs (fuel consumption or mileage-related vehicle depreciation). Theory suggests that these benefits are capitalized into local property values, yielding a localized external benefit. This research explored the nature and magnitude of such benefits. Using a sample of property sales data for Minnesota counties (both rural and urban), researchers examined the impacts of upgrading roads on nearby property values. This research also attempted to track and model the cost of road upgrades considered in the sample in order to provide rough comparisons of these costs with the estimated benefits flowing from the various projects. It is also important to note that such an upgrade can have a negative effect due to external factors (e.g. noise, pollution), and these factors were also incorporated into the estimation of the effects of network upgrades on nearby land values. Highway projects in three Minnesota counties (Hennepin, Jackson, and Olmsted) formed the basis for the analysis.

Sponsor:

Project Details:

  • Start date: 10/2007
  • Project Status: Completed
  • Research Area: Planning and Economy
  • Topics: Economics