Effects of Establishing New Railroad on the Economic Development

Term Paper, 2015

29 Pages


Table of Content



Introduction of New Rail Systems in Developed Regions
USA Case

Railroad and Economic Impact in Regions Initially without Railroad Systems
China Case: Railroad Expansion in Developing Countries
The Nigeria Case: Railway and Agricultural Growth




Today in the economic environment of each country there are some important factors which make the economy on the growth road, among these factors is the infrastructure and mobility (internally and externally), in the period of industrialization the mobility of resources, raw materials and freights was expensive because of the limitation of mobility access; the primary aim of discovering new ways and systems to an easy and cheap mobility was earning more and more benefits. Establishing new ways to transport easy and cheap was the discovering the rail ways to move passengers and freights among the cities first and the countries after, this new way of transporting made a huge distributing of the economic growth in those pioneer countries, which distributed changing public policies of more and more countries toward establishing the new transport manner, deciding to establish a new railways systems distributed to bring more investments and benefits to the investors and the productivity and growing GDP per capita of those countries.


For generations of observers and researchers, the revolution in transportation, particularly the railroad, has appeared majorly as a determining factor for the development and settlement of different countries in the world (Levinson, 2012; Onyewuenyi, 2011; Salzberg, 2013). However, there have been notable debates as regards whether development in transportation contributed to economic growth or simply came after economic growth. While the significance of the railroad to economic growth may be determined by comparing the emerging railway systems with different economic indicators, it is important to note the possible influence of external economic variables on the development of the economy. Thus, a positive change in the economic conditions of a country during, or shortly after the introduction of railway infrastructure, does not necessarily mean that the economic improvement results from the introduction of the railway systems.

The understanding of the possible influence of other external factors, apart from railroads, on the development of the economy inspired some research studies to focus on clarifying the relationship between the railroad infrastructure and economic growth. While there is clear indication of a relationship between railroad constructions and economic development, most of these studies do not assert if the economic growth is a result of the railroad systems, or if the railroad systems were actually a product of economic growth. This paper presents utilizes case studies from both developed and developing countries, to identify the position of railroad construction on economic development. The case studies investigate the effective economic impact on the introduction of new railroad technology in developed countries, and also analyses the effects of the railroad systems on the economic growth of developing countries that initially had no railroad systems.

Introduction of New Rail Systems in Developed Regions

High-speed rail (HSRs) lines have been developed and proposed in different countries around the world. The merits of these systems is that they present an improved service quality than competing modes (such as bus, air, conventional, and auto), faster speed depending on the particular locations, shorter loading and unloading periods, improved safety, and less labor costs. However, the disadvantage of these systems majorly lies in higher fixed and energy costs, and louder noise. Whether the benefits outweigh the costs is not the focus of this research. HSRs are usually introduced to developed countries, which have the technology and facilities required for such rail systems. This section of the paper presents an analysis of the influence of HSR technology introduction on the economy of two developed countries, USA and China.

Elhorst and Oosterhaven (2008) project direct and indirect advantages (increased customer benefits, indirect reduction congestion, spatial labor market reorganization outcomes, labor market size, and international labor outcomes) from a Maglev system proposed for the Netherlands. The indirect benefits range from 0% to 38% of the direct benefits. The results of interviews with decision-makers at corporations in Utrecht, find some corporations located close to the apparent accessibility of intercity rail connections and urban transit, while some were indifferent. Nevertheless, high-speed trains had no significant impacts on the choice of location for any of the corporations since the benefits over conventional trains were minor and connections necessitated transfers (Willigers, 2003).

Nakamura and Ueda (1989) found that three out of the six areas in Japan with Shinkansen stations had a larger population growth-rate than national average from 1980 to 1985, with no area without the Shinkansen having a higher growth rate than the national average.

It remains unclear whether the connection is that the rail led to the economic growth or regions expected to grow attracted rail investment remains unclear. Comparable research studies performed regarding metropolitan growth shows results which indicated a correlation between Shinkansen and growth (for example Hirota, 1984), however the causal structure remains unclear. Recent research studies suggest that the effects of the more recent Shinkansen lines were not as favorable as previous lines (Nakagawa & Hatoko, 2007). Sands (1993) states that the Shinkansen has expanded growth, but has not caused it.

Albalate and Bel (2010) explains that cities served by High Speed Trains (HSTs) gain from enhanced accessibility, but simultaneously there is a reduction of traditional train and air services on the lines where a HST alternatives are accessible. HSTs do not seem to attract enhanced services corporations, which indicate no greater tendency to locate in regions neighboring HST stations. Also, while business tours and conferences gain from HST services, a decrease in the amount of overnight stays reduce tourist expenses and the utilization of hotel services, thus negatively influencing those aspects of the economy. Interestingly, even though HST line enhance accessibility between the metropolises they link, it disarticulates the area between these metropolises – creating what is called “tunnel effect” (Gutiérrez, et al, 2005). Thus, HST systems seem not to increase inter-territorial unity, but instead they result in territorial division.

Reviewing the influence of Europe, Japan, and other areas with HSRs, Sands (1993), predicted that HSRs in California will reinforce current population and employment and economic growth tendencies. Kim (2000) predicts that HSRs in South Korea will result in a concentration of the population within and around Seoul, while dispersing employment. Even though HSR will present an advantage for its users, ‘the high investments in HST system may be unjustifiable based on the economic growth effects owing to their uncertainty (Givoni, 2006).

USA Case

The network structure of HSR lines is usually the hub-and-spoke design, connecting hub cities (e.g. Madrid, Tokyo, and Paris) to subordinate cities in tree-like design. These networks have infrequent crossing links, characteristically at lower frequency, lower speed, and lower construction costs than mainlines. Since these systems are nationally designed, with the biggest city usually serving as the capital (as in Madrid, Tokyo, and Paris), which is (approximately) centrally positioned, it is not surprise where the hub in US was located. The objective for the hub-and-spoke network is to achieve density economies in the track utilization and network outcomes at the hub cities which permit frequent service to various locations. Various paths between the origin and the destination would spread the network effects and lead to less frequent services, and thus reduce the overall demand. The hub-and-spoke pattern, while being beneficial to the network in general when demand is not sufficient to permit recurrent point-to-point service, clearly aids the hub cities the highest, as they take advantage of the incoming flows which lead to increased and therefore higher level of service. In air transport systems, airlines usually utilize the hub-and-spoke system, and if there is a large market share located at the hub airport, will utilize harness the opportunity and charge premiums for travelers, thus capturing majority of the benefits consumers get for residing in a hub city.

Hall (2009), explains that the spatial impacts of the new lines would be complicated. He explains that they will favor the major large central cities they link, particularly the urban cores of these cities, and this would in turn, threaten the situation of peripheral locations. Preston and Wall, (2008) explains that the wider economic advantages of HSRs are difficult to identify, since they are flooded with other external factors, but the economic impacts would more possibly be identified in more central settings than in the peripheral positions (Levinson, 2012). For the purpose of this report, a hub is an activity center, from which a minimum of three spokes (connections to other cities) originate.

The proposed US Program (illustrated in the figure below) has no actual national construction. There have been a number of proposals on one map. These may be viewed as hubs located at different significant points as tabulated below:

Table 1: Types of Hubs Cities and their effects on urban creative economics

illustration not visible in this excerpt

Source: Zachary P. Neal, Types of Hub Cities and their Effects on Urban Creative Economies, Chapter 10, communicating link https://www.msu.edu/~zpneal/publications/nealhubs.pdf


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Effects of Establishing New Railroad on the Economic Development
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effects, establishing, railroad, economic, development
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Nawshirwan Rashid (Author), 2015, Effects of Establishing New Railroad on the Economic Development, Munich, GRIN Verlag, https://www.grin.com/document/302550


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