THE GEOGRAPHY OF TRANSPORT SYSTEMS
Transport Economic Indicators
Author: Dr. Claude Comtois
1. Common Economic Impact Indicators
Undoubtedly, transportation plays a considerable role in the economy with its omnipresence throughout the production chain, at all geographic scales. It is an integral constituent of the production-consumption cycle. Economic impact indicators help to appreciate the relationship between transport systems and the economy as well as to inform on the economic weight of this type of activity. Geographers should be familiar with basic econometric impact indexes.
| Factors of production | Scale-specific indicators | |
| Micro | Macro | |
| Output / Capital | Transport sector income / Local income | Output / GDP |
| Output / Labor | Output / Local income | |
| Capital / Labor | ||
Efficiency is usually defined as the ratio of input to output, or the output per each unit of input. Modal variations in efficiency will depend heavily on what is to be carried, the distance traveled, the degree and complexity of logistics required as well as economies of scale. Freight transport chains rest upon the complementarity of cost-efficient and time-efficient modes, seeking most of the time a balanced compromise rather than an ideal or perfect equilibrium.
Maritime transport is still the most cost-efficient way to transport bulk merchandise over long distances. On the other hand, while air transport is recognized for its unsurpassed time-efficiency versus other modes over long distances, it remains an expensive option. Thus, vertical integration, or the absorption of transportation activities by producers, illustrates the search for these two efficiency attributes by gaining direct control over inputs.
2. Transportation and Economic Impacts
The relationship between transport systems and their larger economic frame becomes clear when looking at restructuring patterns which carriers and firms are currently undergoing. Structural mutations, best illustrated by the popularity of just in time practices, are fuelled by two opposing yet effective forces: transporters seek to achieve economies of scale while having to conform to an increasingly 'customized' demand.
Factor substitution is a commonly adopted path in order to reduce costs of production and attain greater efficiency. Containerization of freight by substituting labor for capital and technology is a good illustration of the phenomenon. Measures of capital productivity for such capital-intensive transport means are of central importance; an output / capital ratio is then commonly used. While the output / labor ratio performs the same productivity measurement but for the labor input (this form of indicator can be used for each factor of production in the system), a capital / labor ratio aims at measuring which factor predominates within the relationship between capital and labor productivity. The above set of indicators therefore provides insights on the relative weight of factors within the production process.
More scale-specific indicators can also be used to appreciate the role of transport within the economy. Knowing freight transport both contributes to and is fuelled by a larger economic context, freight output can be confronted against macro-economic indicators: an output / GDP ratio measures the relationship between economic activity and traffic freight, in other words the traffic intensity. At the local level, the status of the transport industry within the local economy is given by a transport sector income / local income ratio. Still at a micro-scale, finally, a measure of the relative production value of freight output is provided by an output / local income ratio.
Underlying objectives of application of such indicators are as varied as they are numerous. Efficiency indicators constitute valuable tools to tackle project viability questions as well as to measure investment returns and cost / subsidy recovery of transport systems. Input-output analyses making use of some of the above indicators are also instrumental to the development of global economic impact indexes and productivity assessment concepts such as the Total Factor Productivity (TFP) and to identify sources of productivity gains.
