Title

Cost-Benefit Analysis of Investment in High-Speed Train System in Spain

Document Type

Journal Article

Publication Date

2006

Subject Area

policy - congestion, economics - pricing, economics - benefits

Keywords

Spain, Social costs, Social benefits, Pricing, Marginal costs, Investments, Investment requirements, High speed trains, Externalities, Economic efficiency, Cost benefit analysis, Congestion pricing, Benefit cost analysis

Abstract

This study compares the results of two political approaches to transport directed at the reduction of negative external effects. The comparison is between a policy of building a high-speed rail line to attract travelers away from highways and full social-cost pricing on all modes, that is, removing the implicit subsidies to all modes by pricing congestion and external costs. The former approach was adopted in 1992 in Spain with the introduction of the high-speed train in the Madrid–Seville corridor, bringing with it an important increase in the modal share of railway transport. From the analysis made, it can be concluded that from the point of view of economic efficiency and social benefit optimization, the high-speed train should not have been implemented that year (1992) in the Madrid–Seville corridor. Other transport policy approaches, such as the introduction of an optimal modal price based on the respective marginal social costs, would have increased social benefit. Therefore, the results obtained in this investigation indicate the necessity to introduce higher economic efficiency in the transport market through the application to each mode of transport of a price based on the marginal social cost.