The future of interurban public transport will be significantly affected by public sector decisions concerning investment in infrastructure, particularly the construction of new high-speed rail lines in medium-distance corridors where cars, buses, airplanes and conventional trains are the competing modes of transport. The distribution of traffic between the alternative modes of transport depends on the generalized prices, which fundamentally consist of costs, time and government's pricing decisions. High-speed rail investment, financed by national governments and supranational institutions such as the European Union (EU), has drastically changed the previous equilibrium in the affected corridors. This paper discusses the economic rationale for allocating public money to the construction of high-speed rail infrastructure and how the present institutional design affects the selection of projects by national and regional governments, with deep long-term effects in these corridors and beyond.
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