Network industries, economic stability and spatial integration

The evidence on the implications of transport for regionaleconomic and political integration is mixed. This is not surprisingsince transport is one element of a complex web of factors thatdetermine the extent to which spatial areas become integrated.There are also good reasons to expect the optimal level ofcohesion to vary between groups of regions and variations inthe degree of integration. Much of the recent attention in Europeregarding the use of transport as an instrument of integrationhas centered upon the creation of an appropriate infrastructureas illustrated by the TENs Programmes of the European Union.Notwithstanding questions concerning the suitability of thisapproach to bring about greater cohesion through investmentstrategies, there are also issues concerning the way operationsand use of transport networks can contribute to greater spatialeconomic integration. The focus of recent policies has beenthe liberalization of transport markets and the greaterinvolvement of the private sector in providing actualtransport services. There are theoretical grounds for suggesting thiscan enhance both the technical and dynamic efficiency of supplyand these tend to be supported by the emerging empirical findings.The difficulties with relying on market and competitive forcesto provide network services is the nature of supply and demandcharacteristics associated with networks may not produce a stablesolution. At the extreme they can result in deficiencies in outputand, under less theoretically rigid conditions, can lead tovolatility in supply. The result is that even where transportmay have the potential to enhance spatial cohesion this potentialwill not be completely realized. This paper, drawing in particularon the theories of Edgeworth, looks at the underlying nature of thispotential problem, examines the empirical evidence with respect tosome European transport networks and considers appropriate policyresponses.