Research Programme

Research Programme of the Spatial, Transport and Environmental Economics Researemptych Group of the Department of Spatial Economics, 2011 - 2015

Summary
The research programme addresses four interrelated themes: urban and regional dynamics, land use, transport and environmental and resource economics. Some keywords to sketch the topics within these themes are:

• Urban and regional dynamics: agglomeration economies, housing markets, regional labour markets, migration
• Land use: land rents, spatial externalities, flood risk, spatial planning
• Transport: congestion, network reliability, accident risks, sustainable transport, transport policy
• Environmental and resource economics: biodiversity, agri-environmental schemes, renewable resources, green paradox, climate change adaptation

The research theme is characterized by a combination of scientific innovation and policy relevance, among others via the route of cost-benefit analysis and broader policy evaluations, based in welfare economics. Starting from the economic domain efforts are made to establish links with related disciplines such as natural sciences, geography and planning, engineering, biology, psychology. In the programme extensive use is made of tools and methods such as spatial econometrics, economic experimentation, meta-analysis and geographical information systems.

Through its work at the intersection of advanced scientific approaches and policy relevant questions, the research group has been exceptionally successful in acquiring external funding for research. Up to 70% of the research is funded by outside sources, which range from funds for fundamental research (ERC, NWO) to funds for strategic and more applied research (FES, EU).

Introduction
The research programme on spatial, transport and environmental economics consists of four interrelated themes: urban and regional dynamics, land use, transport and the environment. The programme addresses topics of high policy relevance such as spatial quality in urban and rural areas, congestion in transport networks, resource scarcity and spatial dimensions of climate change. To understand and analyse the issues, we must establish the relationships between diverse phenomena such as urbanization, economics, migration, trade, infrastructure, location choice, accessibility, environment and safety. Spatial economics attempts to do exactly this. As a subfield of economics, its perspective is primarily economic, but it also involves a good understanding and appreciation of knowledge and methods from neighbouring disciplines such as geography, traffic management, environmental management and spatial planning. Within the broad field of the economic sciences, spatial economics is often relatively close to applied welfare economics, and it makes intensive use of techniques and methods from the modern microeconomic and econometric toolboxes.

The research group has been successful in achieving substantial outside funding for its research in addition to the funding from the university. The share of outside sources is about 70%. Main parts of the outside sources stem from NWO (the Netherlands organisation for scientific research), FES programmes for strategic research on urban dynamics, sustainable transport, climate change, etc) and other sources including EU project funds. The group is proud that it hosts no less than three holders of advanced grants ERC grants (Erik Verhoef, Cees Withagen, Rick van der Ploeg). The research group cooperates in a structural manner with agencies such as CPB, PBL, KiM and TNO.

The research themes of the group are also the key components of Master programmes STREEM (Spatial, Transport and Environmental Economics) and UNIGIS. Members of the team with systematic prominent positions on lists of Dutch economists in terms of publications, citations and H index include Richard Tol, Peter Nijkamp, Piet Rietveld and Erik Verhoef. This is also confirmed by high scores on REPEC lists. On average each year about six PhD candidates from the department successfully defend their thesis.

Objectives
The programme’s mission is to seek, maintain and further develop a nationally and internationally recognized top position in academic and project research on the economics of space, transport and the environment. This is done by performing innovative analyses of the economics of space, transport and the environment, both in terms of studies that lead to widely recognized and cited publications in internationally renowned top journals, in the field as well as general interest journals in the economics discipline, and in terms of innovative project research, seeking synergy between these where possible.

The (interrelated) objectives that follow from this mission are to:

• Perform innovative research at the international forefront in the programme’s fields, and to be the world’s leading groups in a selected number of thematic spearheads;
• Maintain high publication standards, in terms of quality and productivity;
• Maintain a strong impact in the field, in terms of influence and also as reflected in citations;
• Secure sufficient external funding, from diversified sources;
• Maintain strong and productive ties with selected research groups from the international arena;
• Be and remain visible not only as authors, but also in positions serving international associations and journals;
• Translate empirical and theoretical research findings to practical policy questions and serve society by facilitating evidence-based policy advice.

Motivation
The spatial economics domain covers a large number of complicated policy problems that require sound scientific analysis. There are plenty of examples, and here we mention just a few to illustrate the complexity of the problems that the discipline addresses. How can we structure the limited amount of space available in densely populated areas in such a way that people with diverging cultural and ethnic backgrounds, different ages and incomes can live and work peacefully and healthily alongside one another? How can urban and rural areas be developed for sustainable land use in the broadest sense of the word, while taking into account all kinds of economic, ecological and social factors? How can we guarantee the accessibility of economic centres when the continued concentration of economic activity in successful centres leads to ever-increasing traffic flows that threaten the success of those centres? Policy initiatives to increase accessibility have often been disappointing, partly because of feedback effects on the location choices made by firms and households. Policies that favour strong cities and vital rural areas often have adverse effects on accessibility and environmental quality.

Research Methods
Main features of the research programme are:

• Combination of scientific innovation and policy relevance, among others via the route of cost-benefit analysis and broader policy evaluations, based in welfare economics.
• Efforts to link economics with insights from other disciplines such as natural sciences, geography and planning, engineering, biology, psychology and evolutionary computation.
• Development and use of research tools and methods relevant for the fields including spatial econometrics and economic experimentation.
• Broad orientation on methods, varying from theoretical and conceptual analysis to applied empirical work, encompassing a wide variety of techniques such as stated and revealed preference studies, network and spatial interaction modelling, and discrete choice analysis.
• Use of meta-analysis as a statistics based tool for a systematic literature reviews on certain key parameters in spatial economics, usually involving an explanatory analysis of the factors that explain differences in outcomes of the various studies incorporated in the review.
• Extensive use of tools from geographical information science (GIS) to adequately use the huge data spatial data bases increasingly becoming available.

Description of the programme

Urban and regional dynamics
Urbanization is a multifaceted phenomenon posing a wide range of theoretical and empirical challenges with profound policy implications. A central topic in the programme is agglomeration economies. What are the driving forces that result in clustering of people and firms in space? Is the extent of clustering optimal from a social point of view? What is the spatial scope of externalities and do they differ between sectors in the economy? How can agglomeration externalities be identified using variation in land rents, wages, migration patterns, foreign direct investments, etc. A second and related theme looks at the regional implications of agglomeration economies at the national as well as the European and global level. Are regional inequalities enhanced of alleviated? Is there scope for place based policies as a response to declining regions? How can we assess the costs and benefits of interregional transport infrastructure? 

These challenging questions are addressed by combinations of state of the art theoretical and empirical research methods. The programme exploits micro-data on individual wages, productivity, housing prices, commuting behaviour, etc. To identify causal impacts of clustering of economic activity and to find the drivers of urbanization processes. (Spatial) econometric techniques are used to derive the nature and spatial scope of externalities. Research on mobility of goods, people, capital and services effectively exploits techniques to model and analyse spatial interaction. This line of research also aims to identify the importance of soft barriers to interaction that are of cultural and institutional nature. And theoretical and empirical contributions are made to further the applicability of cost benefit analysis focusing on the welfare theoretical foundations as well as the empirical identification of wider economic benefits.

Land use
Land is one of the arenas in which economic actors compete with each other. Spatial externalities play a strong potential role, which is a main reason why the public sector in a densely populated country such as the Netherlands is strongly involved in regulating land use. Much of the research in the research group addresses valuation of spatial externalities. In particular amenities such as cultural heritage, public and private services, quality of nature are studied. This is done by a range of methods where in addition to hedonic pricing models, valuations are also obtained by means of modelling the location behaviour of households searching a residence, tourists choosing a holiday destination, people choosing a place for leisure or recreation, firms deciding on where to locate. Most of the research addresses urban land use and the valuation of urban amenities, but also rural land use is studied, where the contribution of agricultural and non-agricultural activities to the rural economy is analysed. An important theme is the trend of a shrinking population in certain rural areas and its impacts on private and public services and the effectiveness of policies to cope with this.

In addition to the positive spatial externalities in land use, research also addresses negative externalities such as the impact of industrial sites on residential values, airport noise and criminality. A mixed case is water, generally having both positive and negative effects on land values: living close to water is usually valued positively, but flood risks have the opposite effect. The economic valuation of flood risks is one of the challenges addressed in this programme, providing a clear link between land use and the theme of adaptation to climate change.

Models for land use are developed in order to address the interrelationships between various types of land use in metropolitan regions or countries and to derive the driving forces behind land prices. Special attention is paid to the valuation of intended and unintended effects of public sector interventions in land markets. Interrelationships between land use on the one hand and the other themes of transport, urban development and the environment on the other are explored. Special attention is paid to the joint modelling of transport and land use. One of the activities is the further development of the Landuse-scanner, a flexible tool for long run predictions of land use at a detailed spatial level. Research in this field is supported by rapid developments in geo-information science and spatial econometrics.

Transport
Transport markets often pose challenging questions to the economic analyst, as they do to transport policy makers. For example, problems of congestion and travel time unreliability, emissions and accident risks in transport networks imply negative externalities that lead to sub-optimal market outcomes. The same is true for the existence of market power for service operators and/or suppliers of nodal or link capacities in network markets. Specific challenges in the economic analysis of transport markets arise, inter alia, from the network structure, the mutual dependence between transport and spatial markets (e.g., land, housing, labour), and the multi-dimensional character of transport ‘goods’, in terms of for example trip timing, choice of origin and destination, route, modal choice, etc.

Against that background, a first theme in the research concerns the economic design and performance of instruments such as pricing strategies, public or private supply of infrastructure, and information provision, to reduce congestion and uncertainty. Given various constraints on policy making in reality, the relative performance of second-best instruments receive ample attention in this work.

Next, valuation techniques, including discrete choice analysis of both stated and revealed preference data, are developed and are used to assess the value of intangibles such as the value of life and limb; the value of travel time savings, variability and schedule delays; and other social costs and benefits of transport. Along with this, the required micro-datasets are constructed, using inputs from large scale questionnaires for SP-studies, and real-life experiments for RP-data, that are also developed within the programme.

Transport network markets are analyzed from an Industrial Organization perspective, with a special interest in how strategic behaviour of major actors – such as service operators or private suppliers of infrastructure – affects optimal government policies for these markets. Likewise, the impact of employers on the functioning of transport markets, for example via the company car or employer-paid parking schemes, is studied. Technological change to meet long run sustainability goals is studied among others via the study of adoption behaviour of the electrical car or other vehicles with alternative fuels. And finally, the interactions between transport and other spatial markets is central in research on themes such as the analysis of commuting behaviour in relation to locational choice, and the assessment of economic costs and benefits of infrastructure provision, notably in terms of its direct and indirect impacts on regional and urban economies.

Environmental and resource economics
Environmental economics addresses negative externalities in the form of pollution and/or depletion of resources, brought about by the process of production and consumption. An important question is the design of optimal policies to restore efficiency in the economy. Resources enter the picture because many externalities are closely related to resource use. Prominent examples are overfishing in the case of renewable natural resources and climate change as a consequence of CO2 accumulation due to the use of fossil fuels, in the case of non-renewable resources. One important topic is renewable resource use, where research focuses on the conservation of biodiversity (and more specifically on the role of agri-environmental schemes therein), and on the resilience of natural resource dependent economies. Agri-environmental schemes aim to stimulate biodiversity conservation on farm lands, and are typically thought to be a two-edged sword: rather than paying farmers income support by subsidizing products they produce, they now receive compensation for the amount of biodiversity they have on their land, or on the type and number of biodiversity conservation measures they took. Increasing the efficiency of these schemes is the main objective of this research, the insights of which can also be applied to other environmental issues like climate adaptation investments (think of paying farmers for water storage in case of fluvial floods). Resilience of natural resource dependent economies addresses the issue under what circumstances economies are willing and/or able to buffer exogenous shocks to their resource base.

The economics of climate change is the second prominent research topic. Here, the focus is on the so-called green paradox. The green paradox entails the failure of climate change policies that mainly pays attention to the demand side of fossil fuels and neglects the supply side. An example is providing subsidies on the use of renewable energy, such as solar and wind, without imposing appropriate carbon taxes. This may in the short run lead to higher rather than lower extraction rates of fossil fuels, given the behaviour of fossil fuel suppliers, and thereby to a deterioration of green welfare as well as social welfare. Research questions include:

• What is the optimal development of an economy, in terms of investments, in the presence of fossil fuels and so-called backstop technologies?
• How can the international dimension of the green paradox be taken into account? Here issues such as carbon leakage are studied.
• On a more general level, we study whether the interaction between jurisdictions leads to too lenient policies.