Transcript Lecture 6

GE 541
September 18, 2008
Transport and Economic
Change:
Background Concepts
Review so far of Transport Impacts on:
 Socioeconomic and urban development
 Supported by statistical and descriptive evidence
 A preliminary level of understanding
 A fuller understanding of transport-development relationships
would require understanding of change agents and
the processes they operate through, cause and effect mechanisms
and the like.
 Explanatory models of transport developments and socioeconomic
change of varying levels of sophistication exist, and we will
survey some of these models.
 Prior review of background concepts of transport and development
necessary.
Economic flows, capital, and infrastructure
Slow and fast processes
Economic Growth and Development
Growth --- a matter of scale
Development --- a structural change, reflecting a change in
the environment of the decision agent, and a new behavioral pattern
Infrastructure
Large, lumpy, and long-lived
Economic and Social Overhead
Provision of transport facilities and different utilities enhances
the productivity of producer capital (machinery, equipment,
livestock, etc.) and of consumer capital (housing).
Investments in education, heath care, recreation enhances the
quality of human resources through improved skills, reduced
absenteeism, etc.
The term ‘Infrastructure’ used in economic development
literature since 1940s impressionistically --- Rosenstein-Rodan,
Nurske, and Hirschman.
Youngson’s view of infrastructure:
Not a set of things but a set of attributes.
Two attributes recognized.
Capital can be viewed as infrastructure to the degree
a) it is a source of external economies, and
b) it has to be provided in large units ‘ahead of demand’.
Both criteria imply the desirability of some public investment
(since, given the external effects, private investment tends to
be not socially ideal).
Provision ahead of demand is an ex post argument (satisfactory
when outcome is known).
Argument for such provision strong when infrastructure is
non-specific in character, which can be used for production
of many types of final outputs such as education infrastructure.
Direct and indirect benefits of a novel idea
Stock of Infrastructure has several effects on the level
and mix of productive activities:
* reduces the prices of material and labor inputs and
increase efficiency and,
* capacity increase leads to a better quality of service
— 6-lane highway has more capacity and faster and safer
than a 2-lane highway— creating new demands.
Infrastructure and the Efficiency
of Production
MC1
MC 2
Cost
($)
b
e
Price
a
c
d
Q1
Q2
Output
Services, information activities, and communication
infrastructure
Over the second half of 20th Century, US and other
industrialized countries have had a structural shift towards services.
Long-term Shifts in the Employment Share of Service
Sector, 1920-1980
Country
USA
UK
France
W. Germany
Italy
Japan
1920
38.4%
43.7%
26.9%
27.7%
18.6%
22.4%
1950
51.7%
45.8%
33.9%
36.5%
25.1%
27.0%
1970
61.5%
51.9%
43.7%
45.9%
30.4%
40.0%
1982
68.0%
62.6%
57.2%
51.8%
50.6%
Three Reasons for Services Growth:
* Income elasticity for services > 1.
Complementarity of consumption of goods and services
* Rise of transaction costs (risk, uncertainty, asymmetrical
distribution of information, coordination and control), and
Adjustment costs ( production of skilled labor, special capital
goods, and new organizations). This leads to new human
capital and producer services.
* Slower productivity growth in some service sectors; share
of services employment grows.
Growth segments of service sector;
* Final services e.g. education and health — sophisticated,
internationalized sector of service production,
* Producer Services: Increasing global division of labor,
global corporations, importance of coordination and control, and
* Producer service-like functions in the public sector: the
need to protect consumer interest, workers’ rights,
environment, equal opportunity, promotion of national
economic interest in a global economy.
Increasing need to integrate and coordinate the
increasingly differentiated, and specialized parts of a
global economy.
Need for ‘economic intelligence’, ‘technological and
scientific information; and information pertinent to
transport of goods and services across space.
‘information economy’, ‘Knowledge industries’
Information
Producers
Bell (1973)
Knowledge Industries
Machlup (1962)
Users of
Information as input
to production
Uno (1982)
Porat (1976)
Different Definitions of Information Activities
Information Workforce Trends 1840-1980
(% of total workforce)
Country 1840 1850 1860 1870 1880 1990 1900 1910
US
5.8 4.8 6.5 12.4 12.8 14.9
UK
4.6 5.1 5.6 6.8 7.9 10.2 12.4 13.3
Germany
Australia
8.5
1920 1930 1940 1950
17.7 24.5 24.9 30.8
19.8 20.9 24.4 27.8
18.3
11.5 15.6 16.3 17.0
1960
42.0
33.1
24.6
22.5
1970
46.4
36.6
30.7
27.5
1980
46.6
33.2
30.2
The U.S. Telecommunications Sector
Revenues ($ Billi on, 1982$)
Capital expend it ures
($ B illi on)
Cumulative Gross Plant
Inves tment ($ Billi on)
Total employment (,000)
Production workers (,000)
1973
41.8
11.8
1976
51.6
12.9
1979
66.5
20.18
1982
78.89
22.53
1986
97.02
24.9
94.8
121.6
155.2
202.35
251.0
1,007
780
961
730
1,070
789
1,100
790
884
659
Communication infrastructure
The information highway
Information investments and Service sector growth
relationships?
Simple transfer of ideas from models of goods
production problematic
Service Transformation attributes
Joint provision of goods and services
Service consumption complementary to goods
consumption
Globalization of production with the functional
differentiation between production and service delivery
on the one hand, and central R&D, administration and
control offices on the other has created a variety of
intermediate services.
Variety of producer and intermediate services increasing
and demanding cheap supply of information.
The increased density, speed, and quality of information
flows (e.g. logistics) has been to ‘transport services.
Some consumer services and the ‘Cost Disease’ (Baumol)
Some form of ‘industrialization’—McDonalds
Other cost reduction innovations: task subdivision, capital
intensification, economies of scale, and transfer some part of
service production from the market to consumer
Manufactured products (autos, TVs), plus intermediate services
(repair services, TV programs) plus physical infrastructure
(roads, broadcast networks, power networks) plus on paid
‘informal’ (household) labor to produce transportation and
entertainment services, ---Combinations of industrial goods,
intermediate services, infrastructure, and time.
Production of Goods
Resource Inputs
(after Garn et al., 1976)
Production
Activity
Environmental
Residual
Goods
The Production of Service Output (after Garn et al., 1976)
Producer Activities
Jointly
Produced
Consumer Assets
&
Attributes
Resource Inputs
Consumer Activities