The Economic Impact of Upgrading Roads

Thursday, October 29, 2009 - 4:00pm

About the Event

Traditional methods of economic analysis for highway improvement projects have focused primarily on user benefits and have sought to quantify them through the estimation of reductions in travel delay or user cost. However, urban economic theory suggests that many of these benefits are capitalized into local property values, yielding a localized spillover effect. Accordingly, it should be possible to develop rough estimates of the value of the benefits from a highway project by estimating the response of local land markets to the improvement.

This presentation discusses the nature and magnitude of benefits accruing to nearby properties that arise from major highway construction or reconstruction projects, more precisely those that add capacity to an existing highway. This method is illustrated with evidence from a recent highway expansion project on U.S. Highway 52 in Rochester, Minnesota (the “ROC 52” project).

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Michael J. Iacono is a research fellow at the University of Minnesota Department of Civil Engineering. His research interests center around travel behavior and transportation policy, planning and economics, with an emphasis on the evaluation of transportation systems. Iacono, along with David Levinson (Civil Engineering), Zhirong (Jerry) Zhao (Humphrey School of Public Affairs), and Adeel Lari (Humphrey School of Public Affairs), recently completed the Value Capture for Transportation Finance Study for the Minnesota Legislature.