Agglomeration, Productivity and Transport Investment

This paper is concerned with the links between agglomeration, productivity, and transport investment. It develops an econometric model to investigate the relationship between the density of economic activity and productivity for different sectors of the UK economy. The motivation for exploring this theme is to test whether there might be any external agglomeration benefits that arise from the provision of transport infrastructure but that are not included in standard transport appraisals. The results show that there are positive externalities from increasing urban densities and that these can be substantial, particularly for service industries.