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Transportation Review | Tuesday, January 04, 2022
A transportation network increases market competition. Economists frequently investigate resource allocation, or how specific goods and services are used. A transportation system improves the allocation process by increasing the number of options available to suppliers and buyers.
FREMONT, CA: Economic growth is one of the most important macroeconomic measures, and logistics and transportation are crucial to it.
Governments must make investments in logistics infrastructure, such as roads, railroads, airports, and ports, to support economic growth. Together with protecting citizens' rights to clean air, decent places to live and work, as well as basic human rights and equalities, governments also need to invest in the environment. Due to a lack of financial incentives, businesses are not motivated to address these difficulties. Different governments' attitudes and priorities about how much attention they give to these issues vary across various countries.
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In a mixed economy, measuring how government involvement has impacted the expansion of logistics and transportation is one approach to determining how effective that influence has been on the economy. A government wants an effective transportation system because it makes it simpler to move workers from houses to businesses, as well as commodities and services between businesses and families. Also, it makes it simple for workers to switch employers and for businesses to supply homes with goods and services.
People must consider whether the expansion of transportation and logistics services is driven by supply or demand. What is the significance of this? Because people are interested in causation: whether logistics is responding to growth caused by peoples’ actions and thus creating transport capacity, or whether it is reacting to growth that we have not caused.
Supply- or Demand-led
Supply-led growth occurs when one's actions cause growth. More transportation and logistics assets, as well as infrastructure investment by the government and businesses, will increase the capacity to produce goods and services, resulting in increased demand. Investing in infrastructure is a classic way for governments to boost economic growth. More transportation, logistics, and related infrastructure lead to economic growth. Increasing the quality of transportation facilities opens up access to more markets, and efficient transportation is less expensive, so people use it more. Large-scale transportation infrastructure projects will have an indirect impact on the local economy; the multiplier effect kicks in and encourages the growth of logistics businesses.
Demand-led growth is more difficult to manage. Investment in overall economic development drives demand for transportation, so the demand comes from consumers. The demand must first existforr transportation services to be profitable, whereas supply-led growth involves expanding transportation and logistics capacity. There are two types of demand: revealed and latent demand. The revealed demand is based on actual goods movements, i.e. people wanting to move more things, while the latter is potential demand that cannot be met due to insufficient transportation infrastructure. A retail park built outside of a town is an example of latent demand; the demand does not exist until the project is built.
Transport decoupling from GDP
It is impossible to anticipate continued growth in economies and transportation activity. There must be a marginal utility point at which a further unit of growth has no impact on GDP. Other non-economic variables that will disconnect transportation activity from GDP development include pollution and traffic congestion. No one anticipates that all land would be utilised for the construction of roads and other logistics infrastructure, as this could have detrimental impacts on the environment.
Finally, since more efficient transportation is less expensive, GDP should increase faster than transportation due to increased productivity and economies of scale, thus demonstrating that the decoupling of transport from GDP has occurred.
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