Treb Allen, Simon Fuchs, and Woan Foong Wong
Working Paper 2025-13
October 2025
Full text
Abstract:
How do we evaluate the welfare gains from transportation infrastructure investment? We present a quantitative spatial framework that integrates both traffic and economic responses to infrastructure investment and derive the elasticity of aggregate welfare to improvements in the transportation network. This approach extends the traditional "social savings" method to incorporate agglomeration and dispersion externalities and endogenous traffic congestion. We calibrate the model to the US freight transport network and assess the welfare impact of upgrading segments of the US Interstate Highway System, quantifying the marginal gains from improvements in specific corridors and highlighting where the returns to investment are highest.
JEL classification: H54, R12, R13, R41, R42
Key words: transportation networks, infrastructure, social savings, quantitative spatial models
https://doi.org/10.29338/wp2025-13
Treb Allen (treb.allen@dartmouth.edu) is with Dartmouth College and NBER. Simon Fuchs (simon.fuchs@atl.frb.org) is with the Federal Reserve Bank of Atlanta. Woan Foong Wong (wfwong@uoregon.edu) is with the University of Oregon, CEPR, and NBER. Please address questions regarding content to Simon Fuchs, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309, simon.fuchs@atl.frb.org. The authors thank Costas Arkolakis for early discussions and helpful comments and suggestions. The views in this paper are solely the responsibility of the authors and should not necessarily be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or of any other person associated with the Federal Reserve System. Any remaining errors are the authors' responsibility.
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