constructing the multiplier: high-speed rail Flashcards
(6 cards)
What is the multiplier effect?
When there is an injection of money into the economy (such as through gov spending or foreign tourists) the overall effect on the economy can be greater than the size of the initial injection. This is because when one person’s income increases, they spend that money, which increases income of others and so on until the money is withdrawn.
Why do some economists believe transport infrastructure will help to stimulate economic growth and productivity?
Reduced travel times will allow firms to access more skilled workers for a larger pool of labour. Secondly, greater interconnectedness of cities allows for firms to access services outside of their immediate area more easily. Thirdly some firms would have access to a wider marketplace than previously, meaning customer base expands.
What does the government claim about HS2 stations?
That they can act as a multiplier or accelerator of local development plans due to footfall produced by commuters, increasing commerce in local areas and creating new jobs, business and demand for housing
Why do some economists disagree with the analysis of trains having a multiplier effect?
The estimated cost of HS2 has increased considerable across multiple gov reviews from £37bn in 2010 to £110bn in 2020. Multiplier seems to be decreasing as costs of the project rises.
What did Lord Berkeley’s unofficial 2020 report on HS2 estimate about the multiplier?
That it was possibly as low as 0.6, which he regards a s poor value for money.
There were initial predictions that the railway would produce benefits more than twice its costs.
What does the government predict demand for rail journeys will be like?
Increase at an average rate of 2.2% each year. Since 1994 it has increased by average 5% each year, so 2.2% is a conservative estimate.
