Some consequences of ignoring relocations in the cost-benefit analysis of transportation infrastructure investments

Traditional cost-benefit models of investments in road infrastructure are often based on demand curves assuming a given spatial distribution of jobs and households. We first use numerical experiments based on a spatial general equilibrium model to illustrate how this potentially introduces a serious prediction bias in the willingness-to-pay for the investments. Our experiments illustrate that it is not in general possible to say whether ignoring relocation effects leads to over- or underprediction of commuting flows. We identify cases of both kinds, and also cases where substantial changes in the road transportation network affect total commuting flows only marginally.