introduction to the special issue the regional and urban effects of high-speed trains

Ann Reg Sci (1997) 31:1–20

Introduction to the special issue

The regional and urban effectsof high-speed trains

U. Blum 1, K.E. Haynes2, C. Karlsson3

1 Fakultat fur Wirtschaftswissenschaften, Technische Universita¨t Dresden, Mommsenstraße 13,D-01062 Dresden, Germany2 Institute of Public Policy, George Mason University, 4400 University Drive – 3C6,Fairfax, VA 22030-444, USA3 Jonkoping International Business School, Jo¨nkoping University, P.O. Box 1026,S-55111 Jo¨nkoping, Sweden

Received: December 1996 / Accepted: January 1997

This special issue will be published in two parts:Part I in Vol. 31, No. 1, 1997, Part II in Vol. 31, No. 2, 1997

Abstract. High-speed trains could be used to solve two different accessibil-ity problems. In the first case, where a point to point link is dominant, theyare a potential substitute for air travelling. In the second case it links to-gether many cities and, hence, creates a new type of region or corridorwith a high interregional accessibility. One important hypothesis for the dis-cussion in this paper is the degree to which cities that are linked togetherinto a band of cities by means of a high-speed train connection are trans-formed to an extended functional region or in other words an integratedcorridor economy. This paper particularly examines economic integration ina corridor economy in the short, medium and long term. In considering theshort-term perspective we discuss not only the integration of goods and ser-vice markets but also the integration of labour markets and markets forshopping, private services and leisure activities. The discussion of the me-dium term perspective is concentrated on the relocation of households andfirms within a high-speed train corridor. To study the long-term integrationeffects of a high-speed train corridor we maintain that the analysis must beconducted using a genuinely dynamic model for the specialisation of pro-duction and, hence, for trade with and transport of goods and services andconsequently transport of people.

1. Introduction

This special issue ofThe Annals of Regional Sciencedeals with economicimpacts of high-speed trains, i.e. their effects on spatial organization (re-gional, urban), on the sectorial composition of industry, on the structure ofinputs, and on the development of location (comparative) advantage.

High-speed trains can be used to solve two different accessibility prob-lems. In the first case, where a point to point link is dominant, each train isa potential substitute for an air connection between two cities1, i.e. it con-nects cities (or rather CBD’s) at long distance with a direct train connec-tion. The high-speed train links between Paris and Lyon, Paris and Londonand, Tokyo and Osaka could be seen as examples of this first type of trainconnection. For this type of high-speed connection the train trip togetherwith the trip to the train station at the trip origin and the trip from the trainstation at the trip destination should be compared with the competing solu-tion which consists of the air trip plus the trip to the airport at the trip ori-gin and the trip from the airport at the trip destination. This kind of high-speed train lines are successful if they can supply a sufficient number oftrips in a more efficient, more comfortable and more environmentallyfriendly way than the competing means of transportation, i.e. mainly airtransportation. In such cases the number of regions directly affected by ahigh-speed train link is normally quite small. In the extreme case only tworegions are affected.

In the second case, where a high-speed network is dominant, the trainsystem links together many cities and CBD’s and, hence, creates a newtype of region with a high intra-regional accessibility. In this case the high-speed train binds together cities in a band, where each pair of cities is at atime distance of between 20 and 40 min, i.e. a time distance that allowsdaily commuting. In, for example, Germany a number of cities are con-nected in exactly this manner by a high-speed train. Such a solution givesrise to a band of cities and, hence, creates a large functional region formedlike a string of pearls.2 According to established models for regional devel-opment the expected competitive advantage is large, in particular, for aband of cities formed by a railway for high-speed trains combined with ahighway. Such bands of cities are in the literature described as corridors(Andersson and Matthiessen, 1993; Cheshire, 1995; Haynes, 1997). Theauthors have in this connection stressed the existence of specific corridoreffects, where the economic development in the regions forming the corri-dor are favoured by the improved internal accessibility and the improvedconditions for face-to-face contacts in the corridor. The advantages that inparticular the private but also the public sector can gain from improved ac-cessibility do on the one hand come from the possibilities to carry througha larger number of contacts with other firms, i.e. with customers and sup-pliers, and on the other hand from the improved opportunities to recruit la-bour with a suitable competence profile. Hence, we may note that im-proved accessibility also leads to a widening of the regional labour mar-kets. Firms can search for labour in wider circles and people in the labourforce can supply their labour within a larger geographical area. Wider la-bour markets, of course, mean more frequent and longer commuting trips.

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1 We may observe that high-speed trains also lead to a substitution from physical goods andservices to high-speed train trips.2 Actually, in the German case we could speak not only of bands of cities but rather of anetwork of cities connected by high-speed trains.

This is an important starting point for analysing the regional and urban de-velopment effects of the establishment of a new corridor economy. Thebusiness trips that a larger number of contacts lead to and the increasedcommuting that the improved accessibility give rise to are in their turn twoof the basic roots for direct financial justification of high-speed train traffic.

An important hypothesis for the discussion in this introduction chapteris the degree to which cities that are linked together into a band of citiesby means of a high-speed train are transformed to an extended functionalregion. The implications of this hypothesis are far reaching. At a generallevel we should expect two effects when small functional regions are inte-grated to form a larger functional region. Firstly, we expect the travel inten-sity to increase and, secondly, we expect the economic growth in the re-gion to be stimulated when labour and service markets are extended. Inter-national studies seem to show that one gets the strongest growth stimuliwhen there is a corridor that combines highway linkage with a high-speedtrain access and where all important high-speed train stations have well-de-veloped and well-functioning feeder systems (Cheshire, 1995). At the sametime we can observe that people living in a corridor with a high-speed con-nection make more medium- and long-distance trips per person and year bytrain than people living in other types of regions. When the supply of traintraffic is of high quality with high traffic frequency and multiple attractivedestinations (which a band of cities normally provide) one could expecttrain travel to increase substantially not least due to induced traffic (Blum1995).

To make the discussion in this chapter clear we start by defining whatwe mean by a functional region:

• A functional region is a geographical area that shares a common labourmarket and a common market for household and business services. Thelabour market criteria is of primary importance.

A functional region distinguishes itself by being a common ground for anumber of important economic and social functions, in particular, marketsfor local services, the market for labour and markets to satisfy the demandfor proximity. In our definition, a functional region is consequently the ba-sis for comparative advantage as through its size, all non-tradeables are in-corporated, i.e. it is the area where production equals consumption of localgoods. A robust labour market with a well-differentiated supply of variouscategories of specialised labour offers, for example, both firms and house-holds richer and economically safer development and expansion possibili-ties than regions with smaller and thinner labour markets.

Proximity within a functional region has a fundamental importance formany economic activities. Even if access through information networks hasgrown rapidly in importance, transaction activities, negotiations and busi-ness deals have not ceased to be concentrated to city environments offeringopportunities for face-to-face contacts. A city region still offers a special-ised arena for all kinds of economic transactions between firms. It offersamong other things support functions for transactions, for head office activ-

The regional and urban effects of high-speed trains 3

ities, and for negotiations between firms. It also offers cash, capital andproperty services, as well as different kinds of R&D services. The locationdecisions seem in this case to be governed by a striving for mutual accessi-bility.

For a band of cities to develop to a functional region it is not enoughjust to build a railway for high-speed trains. For an integrated corridor todevelop there is as a rule a strong need to revitalise the actual cities and, inparticular, their cores, as well as to renew the systems of feeder traffic (in-cluding car traffic) to extend each participating city region by radically im-proved contact possibilities. The built infrastructure and the contact net-works in a city region can be used by both the firms and the households inthe region. The networks bind housing and labour markets together to acommuting region. Hence, the built environment and the transportation pos-sibilities give the skeleton for a city region. A number of interplaying func-tions determine the borders for functional regions. The interplay is amongother things between (i) work places and commuting households, as well asbetween (ii) firms in the region buying goods and services from each other.This interplay will determine to what extent the economic life in a regionwill fill out the framework possibilities provided by the region’s transporta-tion networks and hence to what extent the economic actors are able totake advantage of the available opportunities. At a general level the adapta-tion to given conditions by firms and households are expected to giveagglomeration gains and, potentially, efficiency and productivity gains(Prud’homme, 1995).

In the rest of this introduction, we will examine economic integration ina corridor economy in the short, medium and long term. The integration ef-fect is a result of the distribution of surplus that is extracted through mar-ket power. Once competition increases, not only do prices fall and volumesrise but the rent extracted is redistributed to the consumers. In addition, po-tential positive externalities are also redistributed. At the end of the paperwe introduce the papers included in this special issue.

2. Economic integration

The advantages of economic integration has been the target for an intensedebate and theoretical analysis since the end of the 1940’s. The major partof the analysis has focused on the removal of tariffs and other impedimentsto trade. Cost and time consumption in transportation and travelling are atleast as important impediments to trade as are other barriers to economicexchange created by man. This means that we can analyse the effects ofimproved infrastructure, such as a new high-speed railroad, along the samelines we use to analyse the effects of reduced trade barriers.

The first issue we deal with are the effects of transportation on the mar-ket structure and organisations. The starting point here is that regions form-ing a new corridor are small (compared with the corridor economy or with

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the national economy) and to a substantial degree isolated from each otherdue to deficiencies in the infrastructure. This means that conditions for fulland free competition are limited. With small markets and existing time andcost restrictions for travelling scale economies of many firms will not bemet. Further for some producers of goods and, in particular, for many pro-ducers of services isolation can lead to regional monopoly positions. To-gether, this leads to a less than optimal use of the total production capacity,higher prices, lower consumer surpluses and, hence, to a lower standard ofliving. Monopoly profits will increase differences and protected productionwill in the long run dampen the incentives for productivity improvements.Thus, investments in the transportation system, for example in the form ofa new high-speed rail line or substantial speed improvements on a old line,will be an instrument to better integrate partly isolated markets, reducingmonopoly, lowering prices and broadening choice, while forcing firms withscale economies to increased production and competition with each other.

Another line of reasoning focuses on how specialisation advantageswithin a corridor will give rise to increased productivity and, hence, in-crease the use of the comparative advantages of different regions makingup the corridor. It is a well established result within the theory of interna-tional and interregional trade, that a specialisation along the lines given bycomparative advantage gives rise to a larger production of all products,when the production resources in each region are made available and fullyutilised. But increased specialisation means that each region gets a moreand more concentrated and focused industrial structure as productivity isimproved. To be able to fully take advantage of these productivity gains alarger and larger volume of goods and/or services must be exchanged withother regions. Thus, the welfare-improving intensification of a region’s de-gree of specialisation presupposes an extensive trade with other highly spe-cialised regions and an extensive trade in goods and/or services presup-poses a well functioning transportation system. As a growing share of thetrade between highly developed regions deals with high-value knowledge-intensive goods and services, the importance of rapid, frequent and reliablegoods and passenger transportation is increased.3 This is the backgroundagainst which we appreciate the role that a high-speed train can play in in-tegrating highly developed regions with each other.

A third advantage claimed to be connected with economic integrationare equity effects in the form of a more equal distribution of real income asa result of increased international and interregional trade. This argumentwas first put forward by Ohlin (1933). He claimed that trade expansion asa result of lower transportation costs (or the removal of some other kind oftrade barrier) should tend to lead toward an equalisation of wage levels forthe same type of work as well as other remunerations to the same factorsof production. The reason for this is the exchange or indirect migration ef-fect that results, when regions relatively well supplied with labour, can spe-


3 In this chapter we do not deal in detail with the potential of high-speed trains for transporta-tion of high-value goods but we acknowledge that consideration.

cialise in the production of labour-intensive products that then are tradedwith regions whose products have a relatively small content of labour anda relatively large content of capital, for example. In this way the indirectsupply of capital in capital-poor regions are increased and reduced incapital-rich regions. This happens at the same time as the indirect laboursupply increases in regions with a lack of labour and decreases in regionswith an over-supply of labour. Under normal circumstances this surplusmechanism should work towards a limitation of wage increases in high-wage regions and in a similar way towards a growth in the wage increaserate in regions with a large supply of labour. Hence, besides the direct wel-fare improvement that will follow with better integrated markets one shouldget a more equal distribution of return to labour and capital. As significantwage differences often exist for the same type of job between different re-gions we could, as one important effect of the creation of a corridor bymeans of a high-speed train line, expect an equalisation of income and em-ployment differentials between different regions in the corridor and, hence,a more equalised welfare distribution.

Counter-arguments, however, can be raised against increased economicintegration. Basically, it supports that as part of these dynamics leading tofar-reaching specialisation and extensive trade between regions it will alsolead to concentration of resources and a limited number of products and in-dustries. In turn, this leads to an increased risk exposure when demand andtechnology change. However, this problem will always be largest in smallisolated regions. In this connection it is interesting to note that improvedintegration of neighbour regions by means of an improved transportationinfrastructure is an efficient means to, on the one hand, achieve improvedproductivity through increased specialisation and, on the other hand, avoidmaking expensive investments to safeguard against changes in demand andtechnology. Hence, it is clear that investments in high-speed railway makeit possible for regions affected to take advantage of the benefits of in-creased integration and at the same time to avoid the potential drawbacksof specialisation. Instead they gain extra profits of new infrastructure in theform of new flexibility and greater stability. One reason for this, of course,is that each corridor economy will potentially contain several million jobsand with an efficient and rapid transportation system the expanded and inte-grated economic structure will become more robust. Within such a corridorpeople that face or are threatened by unemployment in declining firms andindustries also face increased opportunities to find jobs in expanding firmsand industries at reasonable commuting distances.

3. Trade in services and knowledge exchange

Most analyses of the consequences of specialisation, trade and economic in-tegration have traditionally focused on trade in goods. This was quite natu-ral during the days of the traditional industrial economy when the mobility

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of consumers and workers was quite limited. For France, around the year1900, Grubler (1990) has estimated that the average daily travel distancewith public means of transportation was around 1 km per inhabitant. InSweden at the same time the average daily travel distance was around0.5 km per inhabitant per day (Andersson and Stro¨mqvist, 1988). Undersuch conditions an equalisation of living conditions between different re-gions by necessity must take place via trade in goods. In the service fieldthe normal situation was that there in general existed partial local mono-poly situations in the labour market, the housing market and in the marketsfor private and public services. Given the huge deficiencies in the transportsystem in the form of high costs and slow means of transportation it wasnatural that the interest in trade in services and to specialisation in serviceproduction was, by necessity, very limited.

Today the situation is quite different. Commercial service production issubstantial and the employment in service production is large and growing.As a result, the question of efficient infrastructure for the transportation ofpersons has, relatively speaking, become much more important. Forecastsfor Sweden (and Denmark) give evidence that the average individual dailytravel distance in the year 2000 might be as high as 50 km (Andersson andStromqvist, 1988). In the case of France estimates point in the direction ofaverage individual daily travel distance increasing to 60 km (Gru¨bler,1990). It is expected that travel to high-order private services will becomeas important as commuting and business travel.

Of course, in the future freight transportation will also play an impor-tant role for the economic integration in high-speed train corridors. How-ever, in the future it will in general not be the conditions for heavy bulktransportation that will determine the degree of economic integration but in-stead the conditions for rapid transportation of high value goods. When theeffects of new conditions for regional integration are to be valued it is,however, vital to have a perspective about the transportation of people.This is central in the European debate on economic integration wherethemes such as the deregulation of air traffic and investments in high-speedtrains have become very important. Even the conditions for the transporta-tion of people in the larger European cities is a central question in connec-tion with the analysis of the internal integration of these regions with re-spect to common housing, labour and service markets.

4. Time gains for business travel

There exists a need for face-to-face contacts for firms in all industries, evenif these contacts vary in duration, extent, scope, purpose and so on betweendifferent firms and industries. Irrespective of if a company is dealing withmanufacturing, trade or service production, it needs face-to-face contactswith suppliers and customers for buying and selling products, negotiationsand contract signing. The education sector, in the widest sense and the


R&D sector have a still larger relative need for face-to-face contacts and,hence, business trips. Most types of education over the compulsory leveldemand (often highly demanded) specialists and thus, both the participants,the lecturers and sometimes both categories have to be spatially mobile toachieve the most efficient solutions from an economic point of view.

Increasingly claims are made that modern information technology to-gether with telecommunications will be able to substitute for face-to-facecontact and, hence, also for business trips. This is probably true for thatpart of the face-to-face meetings that has as their only purpose the transferof routine information. However, many face-to-face meetings have pur-poses other than the transfer of routine information. Instead they are aboutqualified knowledge transfer, the selling and buying of non-standardisedproducts, negotiations, non-standardised decision-making, qualified intelli-gence, lobbying, service production, and so on. If we also observe that agrowing share of all employees are employed in service production, areemployed in knowledge creating or knowledge handling jobs, and have along education, often at the university level, we understand that there arestrong forces working in the direction of increasing the demand for face-to-face contacts (Andersson and Stro¨mqvist, 1988). And we must also observethat the improved telecommunications and the general diffusion of compu-ters, cellular telephones and other types of equipment based upon informa-tion technology have made it much easier to set up business meetings, andto book tickets, rental cars and meeting places. Hence, we could expectgood conditions for business trips and hence face-to-face meetings to be acentral condition for economic integration in the modern economy.

Many service producing firms, in particular those engaged in the provi-sion of producer services, where the firm supplies a service to another firm,work very intimately together with its customer, can gain substantial advan-tages from working on a large integrated market. However, they share theseadvantages with their customers that in a large integrated market canchoose the service provider that best fulfils their needs. Also in the case ofeducation trips it holds that it is most advantageous with a large integratedmarket since such a market makes it cheaper for the user of the educationalservices to use that supplier of education that fit his or her needs best.

One of the reasons driving the establishment of specialised firms for theproduction of producer services is that many of the customer firms wouldhave difficulties in making full use of the services of different kinds of spe-cialists if they were internalised. This is one of the classic agglomerationadvantages of regional economic integration which is exaggerated asproducer services become more central to the modern economy. Conse-quently, the production of producer services is characterised by concentra-tion, face-to-face contacts and a high business travel frequency which inturn requires a high market threshold to support its production.

The profitability of business trips in connection with the provision ofproducer services is determined by the differences in the value of the mar-ginal product for the actual service between different regions. It is oftenpossible to find a limited supply of expertise even in small regions. The

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normal case is, however, that private firms as well as public institutionsachieve a much higher productivity or efficiency if they get access to thoseproducer services that are supplied in a larger market. For example, thereoften exists a special type of highly productive, highly specialised expertisein connection to research institutions and agglomerations of R&D organisa-tions.

Regional differences in the marginal product for a specific type of pro-ducer service are one of the factors that determine the volume of businesstrips in connection with the provision of this type of service. But the priceof business trips and in particular the value of the time used for a businesstrip limit the inter-regional exchange of producer services. As a result wecan say that the development level of the infrastructure for travel is onefactor that limits the integration of service production to geographical areasthat are manageable from a time perspective. Investments in infrastructurethat reduce the travel times open up new opportunities to integrate marketsfor producer services by an increased volume of business travel and busi-ness travel extends the wider geographical area boundaries of functionaleconomic areas thereby expanding their market potential. Such an integra-tion undoubtedly leads to increased economic growth through a more effi-cient resource allocation and via better solutions for all those firms thatnow can use a broader and more qualified supply of specialised producerservices. Improved possibilities to even out the marginal productivity giverise to a process where low productive and inefficient providers of produc-er services are substituted for high productive and efficient service provi-ders, which by definition generates productivity improvements. At the sametime the number of regional service monopolies is reduced, which leadsproviders of producer services to get stronger incentives to become moreproductive and to adopt new methods and innovations.

The establishment of a new high-speed train corridor results in in-creased travel speed. Hence, the travel time falls and potentially the directtravel costs. When the travelling occurs during normal working hours, as isoften the case with business trips, it is easy to calculate the profit of thenew travel opportunity for the business travel that takes place due to the es-tablishment of the new high-speed train line. In such a case losses in con-nection with business trips is a direct loss of working time for the firms.Firms that operate under normal competitive conditions pay a wage – plusindirect labour costs and other over-heads – that is equal to the marginalvalue in production and other income generating activities.

5. Productivity differences and commuting costs

The short-run effects of better opportunities for commuting to work is illus-trated in Fig. 1, where the demand for labour in two different regions DHand DM is assumed to mirror the marginal productivity of labour in thetwo regions. The horizontal axis in the figure shows that the total supply of


labour in the two regions is equal to H+M. In the case when labour canmove freely without any time and/or cost frictions the crossing point of thetwo curves, x, illustrates an equilibrium situation for the integrated labourmarket. At this point the marginal productivity of labour is the same inboth of the labour markets.

In the equilibrium situation without any commuting costs commutingcomprisesP persons. If we now assume that the commuting costs arez orhigher there will be no commuting since the difference in marginal productdoes not cover the commuting costs. If the (generalised) commuting costbetween region H and region M, after the establishment of a high-speedrail line between the two regions, sinks to a value lower thanz, then thecommuting from region H to region M, will reach to a volume that is suchthat the marginal productivity in M is equal to the marginal productivity inH plus the commuting cost. In an equilibrium situation the wage differencebetween the two regions will be equal to the generalised commuting cost.As every reduction of the total generalised commuting cost will lead to alevelling of the marginal productivity in the two regions this reduction alsogives rise to an increase in the total production, i.e. we get net economicgrowth in the combined economies of the two regions. For certain types oflabour the marginal productivity of labour initially is higher in region Hthan in region M. For other types of labour the situation is the opposite.Hence, decreased generalised commuting costs as a result of the construc-tion of a high-speed train line will lead to increased commuting in both di-rections and thus to higher total production in almost all industries.

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Fig. 1. The volume of commuting is determined by productivity differences and commutingcosts

The demand for a certain type of labour mirrors the marginal productiv-ity for this kind of labour when it is used in production. The willingness topay for this type of labour falls successively with increasing supply as fol-lows. There certainly exist non-negligible productivity differences betweendifferent specialists within the same category of specialists. Every firm triesto employ the most productive individuals first and it is only when theredoes not exist any more high productive specialists that they chooseindividuals with a lower productivity. In this way a stair of productivity isestablished within each single industry. The productivity of the last personemployed and hence the total costs for having this person employed deter-mines the wage level for the actual group of specialists. If now two adja-cent regional labour markets lack or have inferior commuting opportunitiesfor different types of specialised labour we get a situation with differencesbetween the two regions in marginal costs and marginal productivity. Thesedifferences under other conditions should be evened out by means of com-muting. A situation of this kind also means that there are differences in realwage for the same type of specialised labour between the two regions. Ifhowever investments in the transportation infrastructure in the form of anew high-speed train line reduces the commuting costs so that the general-ised wage rate becomes lower than the difference in marginal product be-tween the two regions before the investment then the difference in marginalproductivity will be evened out to a level that is equal to the generalisedcommuting cost. Thus, we see that productive efficiency is the catalyst forbuilding the new infrastructure that enables increased commuting.

Let us now start from a situation without a high-speed rail line butwhere there exists some commuting between regions such as H and M.Suppose that this commuting is in an equilibrium. This would mean thatthe existing wage differences between different regions are equal to thecommuning costs. Let us now further assume that through the opening upof a high-speed rail service the generalised commuting cost sinks so that itis lower than the existing wage level differences. It will now be profitablefor certain individuals in region H to commute to jobs in region M andvice versa. An increased supply of a certain category of labour in region M(H) will lead to a tendency for the wage level for this type of labour to de-crease in region M (H). At the same time the supply of this kind of labouris reduced in region H (M), which lead to a tendency for the wages for thiskind of labour to increase in region H (M). Through this kind of adaptationprocess the wage level differentials for different kinds of labour betweenthe two regions will tend to decrease and the advantages of commutingwill tend to decrease with each further commuter at the margin. Over timecommuting will work to create a new equilibrium situation where the dif-ference in productivity of the marginal commuter is equal to the general-ised commuting cost. It might be worth mentioning that transport actuallyinduces two forces that equilibrate factor prices: the transport of goods andthe transport of factors of production. With respect to goods, the potentialto do so depends on market structure and the relative weight of tradables.Consequently, the mobility of factors (labour) may be crucial.


6. Shopping, service and leisure travel

One aspect that often seems to be neglected or treated only superficiallywhen evaluating infrastructure investments is the importance of these in-vestments for consumers. Any study of the regional and urban developmenteffects of a new transport infrastructure, such as a new high-speed trainline, must also consider how the life conditions for human beings outsideof work is affected by such an investment. Access to a large and variedsupply of goods, services and experiences is an essential factor determiningthe standard or welfare people perceive and realise. The number of inter-re-gional trips with the purpose to buy things, to use different types of ser-vices or to access entertainment, leisure or other experiences is very largein all advanced countries. All urban centres, but in particular the largeones, are the destination for these kinds of trips.

Most buying and service trips are characterised by a high price and timeelasticity. With a high elasticity one should expect a very sharp increase inthe number of buying and service trips when the travel cost and/or thetravel time is reduced due to the establishment of a high-speed train link. Areduction of expenses in time and/or money implies that goods and ser-vices that can be bought in other regions within the high-speed train corri-dor suddenly become much cheaper. What happens in this situation is onone hand the transport cost connected with buying goods and services de-creases, and on the other hand the volume of purchasing by individuals in-creases, which leads to lower costs per purchased unit. The decrease in thegeneralised travel costs in connection with service and purchasing trip bythe households in one of the regions in the high-speed train corridor is ex-perienced as a reduction in the prices of goods and services in other re-gions in the corridor, which from their point of view is equal to an increasein their real wage. Lower prices for goods and services that the inhabitantsin a high-speed train corridor buy in other regions in the corridor will havethe effect that to some extent they will cover their need for goods and ser-vices from other areas in the corridor (than in their home areas). However,as they experience an increase in their real wage they will generally in-crease their consumption that will stimulate in part their demand for goodsand services in their home area. If we summarise we can say that increasedintegration in a high-speed train corridor is an advantage for the consumerseven in the short run.

In Fig. 1, we have shown how an improved integration in a high-speedtrain corridor will lead to increased productivity and real wages. Thismeans that we can expect the total consumption to increase in a high-speedtrain corridor when the high-speed train is running, which is one factor thatby itself under a given consumption behaviour will lead households in ahigh-speed train corridor to buy an increasing volume of goods and ser-vices from other regions within the corridor.

In summary we can say that it is five factors that determine the demandfor trips for the purchasing of goods and services:

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1. The relative valuation by the households of the services and goods of-fered in other regions compared to those offered in the home region.

2. The price level of goods and services in other regions compared to thehome region.

3. The real wage level in different regions.4. The transport cost per unit time.5. The travel time round trip from the place of residence to the place of

purchasing.

The establishment of a high-speed link implies increased competition forthe retailing sector and for consumer services in all regions of the high-speed corridor. Increased competition suggests lower prices, which thehouseholds will experience as increased real incomes. Lower transactioncosts and decreased monopoly tendencies also lead to a levelling of theprice level between all regions within a high-speed train corridor. Andwhen the price level is equalised to the extent that the price differential fordifferent goods and services between different regions is equal to the gener-alised travel cost then the number of purchasing and service trips will stopto grow.

Leisure trips would actually deserve a chapter of their own. The supplyof cultural activities such as museums, opera houses, theatres, ballets, exhi-bitions, restaurants, and so on show a very strong regional concentration. Itis only the large urban regions that are characterised by any substantial var-iation in the supply of cultural activities. To take advantage of the supplyof cultural activities is one major reason for people to visit large urban re-gions. Empirical evidence by Fernand Martin (study on museum subsidies)and by Blum and Leibbrand (study on Dresden) suggests that some of themany cultural services are highly competitive export base goods. They arelocally superior, but internationally; because of ample choices (between theMetropolitan, the Paris opera, the Milano opera, the Vienna opera and saythe Semper opera). The establishment of high-speed train corridors contain-ing one or several large urban regions increases the opportunities for peo-ple living in the corridor to more regularly use the supply of cultural eventswithin the whole corridor and in particular in the large urban regions. Inthe modern literature on regional development accessibility to culturalevents is often stressed as a fundamental development factor in the modernknowledge society.

7. Economic integration and relocation

In the medium term one could expect that certain groups of householdswould choose to move instead of continuing to commute. One could alsoexpect that certain groups of firms might change their location within theirregion or within the corridor to take advantage of the improvements in ac-cessibility. Moving can become operational for two types of households.Firstly, we have those households that use the new high-speed train for


commuting purposes. They might in a medium term perspective find that itis less burdensome to move than to commute. Secondly, we have thosehouseholds that have a high valuation on the supply of services, culturalevents and purchasing opportunities in another region within the corridor.They might in the medium term find it to be a better residential locationsolution to move to the desired region and commute to their jobs in the oldregion. At a general level one could say that a new high-speed train line inthis way contributes to increases in the welfare of households in the corri-dor, since it increases the households’ freedom of choice both in terms ofwhere to work and where to live. Further one must note that householdsand firms in other regions might move to one of the regions in the corridorto take advantage of the accessibility that the new high-speed train line of-fers.

Thus, in the medium term perspective we should expect commuting andmoving to be substitutes for each other. A change of place of residencecould be an attractive alternative to a long daily commuting trip, if thehousehold thinks that increased accessibility will allow it to keep its socialcontacts in the region it moves from. Different groups within the popula-tion have very different valuations of the importance of living conditionsand of accessibility to jobs, services, cultural events and spare time activ-ities. Furthermore these valuations vary with which life cycle phase the ac-tual households is in. The construction of a new high-speed train linemight for example lead to younger households and older households, bothwithout children, choosing to move to the larger urban regions within thecorridor due to the greater and more varied supply of cultural and serviceactivities that these regions offer. As a result of the establishment of a newhigh-speed train, one should in the medium term expect a relocation of dif-ferent types of households between the different housing markets withinthe high-speed train corridor. Such a voluntary relocation will of courselead to an improvement in welfare for the actual households. The reloca-tion by itself will hardly influence the travel volume on the new high-speedtrain but rather affect the distribution of the origins and the destinations oftrips was well as the distribution of trip purposes.

An important driving force behind the relocation of households has todo with the fact that many households consist of two persons working out-side home. The secure access to work for both parties and to maximise thepossibilities of developing a career it is important for these households tolive in regions that within a reasonable commuting time offer a large num-ber of job opportunities. To be in a region with a large labour market withgood opportunities to change jobs is essential for such households. Wemust in this connection also note that the possibilities to make a workinglife career is much more important in the new knowledge society than itwas in the old society, i.e. the manufacturing era, dominated by singleworker households. In the knowledge society a substantially higher shareof the work force have a long (university) education and a much highershare of the work force is engaged in knowledge creation and knowledgedissemination. In such a society mobility between different work assign-

14 U. Blum et al.

ments is a part of the new life style and work format as well as a necessarycondition for continued knowledge and creative development. Hence, wecan with good reasons assume that we will see the largest mobility due tolabour market reasons among households with two persons working outsidehome and that have high levels of education.

Firms to a large degree have the same possibilities and the same reasonsas individuals and households to relocate. A firm has a need of local inputssuch as land, buildings and infrastructure. It has also a need of productionequipment, production and product knowledge, raw materials and prefabri-cated inputs, different kinds of labour, and so on. Many of the inputs that afirm needs must be transported from other regions and in many cases theoutput of the firm whether intermediate or final will need to be transportedto other regions. Given that the relative prices of inputs supplied in a givenregion are satisfactory, a firm will use such local inputs if their quality ishigh enough. The establishment of a high-speed train link means that therelative price of transported inputs declines. At the same time the firm, dueto the lower transport costs it now faces, can supply its products at a lowerprice to markets that have become more accessible within the high-speedtrain corridor.4 The effect of these changes is that it now becomes less prof-itable to use local inputs relative to transported inputs. These changes willprobably be most clearly felt among the smaller regions within the high-speed train corridor, since the larger regions, before the establishment ofthe high-speed train link were already offering a great variation in terms oflocal inputs. It is ambiguous whether firms in smaller regions will be ableto take advantages of high-speed access in the medium term. They willfind it easier to recruit labour from other regions within the corridor andthey will also find it easier for them to get access to the specialist knowl-edge they need and that mainly are found within the larger urban regions.At the same time these smaller labour markets might of course be hurt bysome adjustment problems when the local firms decrease their relative useof local factors of production. This points to the observable effect that newtransportation infrastructure also means increased competition for certainactivities and possibly even a loss of jobs.

For firms in larger urban regions with land consuming activities a newhigh-speed train line may make it profitable to relocate activities to one ofthe smaller regions within the corridor that now have higher accessibility.They can do this because of the new connection that makes it possible forthem to keep contact with many of their existing suppliers and customersat the same time as they take advantage of the cheaper land and the lowerwages in the smaller region. In this case the smaller region might gain em-ployment while the larger region loses employment. The most importantconclusion thus far is that the firms due to the establishment of the high-speed train link firstly get an opportunity to change their mix of inputs.Secondly, firms can extend their markets within the corridor and, thirdly,


4 The lower transport costs will mainly influence the costs of transporting people and highvalue goods.

they can relocate activities to more advantageous regions within the corri-dor. A common feature of all these different adjustments is that loweredcosts and/or increased incomes will stimulate increased production and con-sequently generate an increase in the economic growth in the high-speedtrain corridor.

Another and perhaps more medium term effect of the establishment of ahigh-speed train link is that the establishment of the new corridor mightgive rise to an inflow of firms from other regions outside the corridor. Thereason behind these relocations5 is of course that the high-speed corridorwill exhibit new location conditions in terms of improvement in accessibil-ity for transport of people and high-value goods. As high-speed train oftenalso connects corridor regions with international airports, a high-speed trainwill also provide a substantial improvement in international accessibility. Ifthe high-speed train corridor also contains a highway the bonuses of locat-ing within the corridor might become still larger. To estimate the volume ofrelocations that might be realised during the planning horizon is no simpletask. But the value of the extra volume of production generated (net of thedecrease of production in other regions due to the re-allocation of activ-ities) should of course appear on the benefit side in any cost benefit assess-ment.6

8. Economic integration and regional adjustment

Many studies of economic integration are built upon a comparative staticsanalysis. This means that one uses a non-dynamic model where various as-sociations and dependencies are sorted out by means of static assessmentsdeveloped against a background of conditions that holds during shorter per-iods of time. Most models of supply and demand in the market are of thiskind. Traffic models of the gravitation type are also static and are used toestimate the effects of changes in the spatial distribution of population,changes in the travel costs or changes in the travel time. Both supply anddemand models and gravity models are based upon the assumption thatmarginal changes in the assumptions give rise to marginal effects. In nor-mal cases this is a reasonable assumption when one wants to evaluate theeffects of relatively small projects, where the conditions are such that anew equilibrium is achieved relatively fast. However, the assumptions donot hold when we are considering large infrastructure projects such as anew high-speed train line that in a fundamental way changes the activitystage and give rise to quite new role plays at different markets.

Based upon a large study of the European transport, trade and speciali-sation patterns that was carried through by the historian Pirenne (1956), the

16 U. Blum et al.

5 A relocation here stands both for the movement of firm activities from other regions to thecorridor as well as the establishment of new activities in the corridor by firms active in re-gions outside the corridor.6 One should also discuss the effects of a new high-speed line for the organisation of publicsector activities but due to space limitations we do not go into that discussion here.

economist and mathematician Mees (1967) suggested a more structuralmethod of analysis. It builds upon the assumption that one should developa genuinely dynamic model for the specialisation of production and thusfor trade with and transport of goods and services and consequently alsotransport of people.

We can as a starting point think of a regional economy whose base pro-duction is limited to underspecialisation due to the fact that the transportfrictions are too large for full integration. In such a case a very substantialpart of the production and the employment must be devoted to local provi-sion. If the transport frictions are very large each region will become lessspecialised than it should be if transport times, transport costs and othertrade frictions were much lower. If on the other hand the trade frictions fallunder a certain critical value the economic structure within what is now anintegrated economic system of regions shift drastically to a higher speciali-sation level with new trade patterns, larger trade volumes and qualitativelyand quantitatively larger flows of people and goods.

A new high-speed train line that binds together a number of urban re-gions into a string of cities potentially represents a drastic change and thepossibility for new activity patterns can be illustrated by means of a non-linear model of the interplay between travel times, travel costs and travelvolumes (Andersson and Matthiessen, 1993). Assume that the momenta-neous growth in employment in a given sectorj in a regioni is describedby the following differential equation:

_xij � fi �xij;K;T� ��xij ÿ xij�xij �1�

wherexij =employment in sectorj in region i,fi =net benefit of commuting as a function of number of travellers, travel

cost and travel time,K =travel cost per trip,T =travel time per trip,�xij =maximum employment in sectori in region j.

Equilibrium is defined as a condition, where

_xij � 0: �2�

If fi is a positive constant (i.e. it is independent ofxij) that would mean anequilibrium at

xij � �xij: �3�

In general the net benefit of commuting varies with total employment.After a certain marginal value

xij � _xij �4�


the marginal productivity will decrease if the employment increases. Theequilibrium for the employment in a sectorj in a regioni

�xij � 0 � fi �xij;K0;T0� ��xij ÿ xij� xij �5�

will then take place when

xij < �xij : �6�

Let us now assume thatK and T are reduced as the result of the establish-ment of a high-speed train line. In such a case there can sooner or later de-velop a situation where the non-linearity of thefi-function changes so muchthat the internal stable equilibrium situation disappears and is substituted bya new stable equilibrium point:

_xij � 0 � fi �xij;Kc;Tc� ��xij ÿ xij� xij �7�

where

xij � �xij or 0: �8�

Such an exchange of a stable equilibrium point with little specialisation ina region for another stable equilibrium point with high specialisation and ahigh volume of commuting can develop if�Kc;Tc� is substantially lowerthan �K0;T0�, where �K0;T0� represents the situation before the openingup of the high-speed train connection.

To summarise in words we can say that if the travel costs are very highand the travel time very low then further reductions of the travel time havevery small consequences for the specialisation pattern and hence for travelvolumes. If the travel costs are falling steadily that will mean that thetravel time will become an increasingly important factor in determining lo-cation patterns and hence the travel volumes. At a certain low travel costthe model becomes non-linear. What happens then is a very substantial in-crease in specialisation of production and of employment. If the travel costper unit distance is low enough, it can gradually decrease travel time untilit leads to a sudden and drastic growth in specialisation and hence in tradeand travel volumes. Such drastic changes, which do not occur instanta-neously, are well known from many urban regions but on a limited scale.A new highway, a new bridge or a new tunnel often initiates relocations ofsubstantial shares of retail trade from local to regional purchasing centres.And at the same time the valuations of what is a good location for an of-fice or a production unit change. If we summarise we can say that there ex-ists a combination of travel costs and a critical average travel time thatwithin certain transport corridors will lead to a completely new locationpattern with larger travel volumes in quantitative terms and in qualitativeterms to changes in the travel patterns. Part of the expansion is of coursematched by losses at other places, since what is happening is that there will

18 U. Blum et al.

be a change in the patterns of both trip origins and trip destinations. Hence,we end up by saying that, after the establishment of a new high-speed trainconnection, one could expect a non-linear reaction even if its full force willnot be felt until some time after the new line has opened up.

9. Special issue papers

Volume 31/1, Part I (pp. 1–98)

The collection of papers in this special issue brings up a lot of important is-sues with regard to the regional and urban effects of high-speed trains fromboth a theoretical and an empirical point of view. Two papers give us whatcould be described as the macro perspective, one operational and the othertheoretical. Vickerman reviews progress on the European high-speed railnetwork to date and discusses three main issues in their evaluation: compe-titiveness, network effects and corridor development. Kobayashi and Oku-mura in a more theoretical paper propose a multi-regional growth model toprovide some insights into the dynamic impacts of high-speed rail systemsupon the economic geography of city systems.

The spatial aspects of high-speed rail is further developed in the nexttwo papers. Haynes reviews labour market issues in terms of mobility andpolicy resulting from transportation improvements. Sasaki, Ohashi andAndo examine the impacts of high-speed rail transit such as the JapaneseShinkansen, on the regional structure and the system of regions.

Volume 31/2, Part II (pp. 99–218)

The third group of papers is devoted to demand aspects of high-speed railtraffic. Mandel, Gaudry and Rothengatter show that enriching the specifica-tion of the logit mode choice model with mode attributes, socio-economicvariables and trip purpose characteristics significantly improves model qual-ity and that non-linear utility functions obtained by using Box-Cox transfor-mations yield different and more reasonable results than those obtainedwith the usual linear form. Corridors that get high-speed rail normally pre-serves existing conventional rail lines. Hsu and Chung address the problemof how rail passengers will make use of the two rail systems and develop anew analytical model for exploring this problem in a fundamental way forthe Taipei-Kaobsing corridor in Taiwan.

The last group of papers deals with the question of assessing invest-ments in high-speed train lines using cost-benefit analysis. The purpose ofthe paper by Martin is to establish the relationship between the net presentvalue of a high-spreed rail project and its social value, its transportationconsumers’s surplus and its regional economic impact in terms of growthbased upon a Canadian example. Rus and Inglada carry out an economicevaluation of a high-speed train corridor between Madrid and Seville. Astudy motivated by the fact that at present operating revenues are far from


covering operating costs. Levinson et al. examine the full costs, defined asthe sum of private and social costs, of a high-speed rail system proposedfor a corridor connecting Los Angeles and San Francisco.

References

Andersson A˚ E, Wichmann Matthiessen C (1993) Öresundregionen, Kreativitet – Integration.Vaekst, Munksgaard, Ko¨benhavn

Andersson A˚ E, Stromqvist U (1988) K-samha¨llets framtid. Prisma, StockholmCheshire P (1995) The Spatial Implications of Motorway and Train Corridors in Europe. Pa-

per presented at a workshop on Regional and Urban Effects of High-Speed Trains orga-nized by Jo¨nkoping International Business School

Blum U (1995) Markets for High-Speed and Fast Trains: Development Patterns in Germanyand Europe. Paper presented at a workshop on Regional and Urban Effects of High-SpeedTrains organized by Jo¨nkoping International Business School

Grubler A (1990) The Rise and Fall of Infrastructures. Physica, HeidelbergHaynes KE (1997) Labour Markets and Transportation Improvements: The Case of High-

Speed Trains – A Review and Assessment. This issueMees A (1975) The Revival of Cities in Medieval Europe. Regional Science and Urban Eco-

nomics 5:403–425Pirenne M (1956) Medieval Cities. Their Origins and the Revival of Trade. Garden City, New

YorkPrud’homme R (1995) Regional Impacts of High-Speed Trains in France: Experienced and

Expected. Paper presented at a workshop on Regional and Urban Effects of High-SpeedTrains organized by Jo¨nkoping International Business School

Ohlin B (1933) Interregional and International Trade. Harvard University Press, CambridgeMA

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introduction to the special issue the regional and urban effects of high-speed trains

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