Munich Personal RePEc Archive

Cost benefit-analysis of a transport improvement in the case of search unemployment

Pilegaard, Ninette and Fosgerau, Mogens (2008): Cost benefit-analysis of a transport improvement in the case of search unemployment. Published in: Journal of Transport Economics and Policy , Vol. 42, No. 1 : pp. 23-42.

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Abstract

We examine the implications of search unemployment for the evaluation of a transport in-vestment in a conventional cost benefit analysis (CBA) assuming perfect competition. Lower transport costs induces search over a larger area and longer commuting distances. The ex-pected duration of vacancies is reduced with ensuing benefits outweighing the loss to in-creased transport. The search imperfection drives a wedge between the marginal product of labour and the wage, such that the final benefits of a transport improvement exceed those of a conventional CBA. Using a simulation model we find these additional benefits may be sub-stantial.

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