Abstract

The allocation of traffic between different transport modes follows transport user decisions which depend on the generalized cost of travel in the available alternatives. High Speed Rail (HSR) investment is a government decision with significant effects on the generalized cost of rail transport; and therefore on the modal split in corridors where private operators compete for traffic and charge prices close to total producer costs (infrastructure included). The rationale for HSR investment is not different to any other public investment decision. Public funds should be allocated to this mode of transport if its net expected social benefit is higher than in the next best alternative. The exam of data on costs and demand shows that the case for investing in HSR is strongly dependent on the existing volume of traffic where the new lines are built, the expected time savings and generated traffic and the average willingness to pay of potential users, the release of capacity in congested roads, airports or conventional rail lines and the net reduction of external effects. This paper discusses, within a cost-benefit analysis framework, under which conditions the expected benefits from deviated traffic (plus generated traffic), and other alleged external effects and indirect benefits justify the investment in HSR projects. It pays special attention to intermodal effects and pricing.

Abstract

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.