| 22.4.2008 |
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New research in the Bank of Israel:
Transport Infrastructure Investment, Commuting, and Wage*
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Road and rail investments in 1993–2003 increased commuting by 18,000 persons on annual average and explain about two-thirds of the total increase in commuting. |
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Road investments contributed largely to the increase in commuting between contiguous regions and had no real effect on commuting between distant regions. In contrast, the contribution of rail investment was evident largely in commuting between non-contiguous regions. |
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Road investments that amplified commuting made a significant contribution to the increase in men’s wages. |
| Transport infrastructures enhance product by improving firms’ access to potential workers, customers, and suppliers. This study estimated the contribution of road and rail investments to the enhancement of firms’ access to workers, allowing existing human capital to be used more efficiently and making it possible to narrow wage disparities between periphery and center. Notably, most of the harm caused by inadequate infrastructure relates to workers’ access to firms, whereas firms can redirect their activity vis-?-vis customers and suppliers to off-peak times of day. |
| The study, by Ronni Frish and Shai Tzur of the Bank of Israel Research Department, examined the effect of road and rail investment in each of Israel’s fifty natural regions on commuting to a region other than the employees’ region of residence. The authors estimated the change in commuting between origin regions and destination regions between 1993 and 2003. They found that commuting increased (Table 1) and that the upturn was most typical of men, the well-educated, and the young. Furthermore, the share of commuters who entered the Tel Aviv Region declined considerably and the share of commuters to regions close to Tel Aviv increased. |
| Several factors caused commuting to expand beyond the increase derived from population growth: an increase in road investment in the origin region and an increase in road investment in destination regions that are metropolitan, that are connected to the national railroad system, and that are traversed by the Cross-Israel Highway. The cumulative investment in transport infrastructure between 1993 and 2003 explains about two-thirds of the total increase in commuting, which added up to 240,000 persons. Sensitivity analyses show that the contribution of rail investment (which boosted the number of commuters by 18,000) is most evident between distant and non-contiguous regions, whereas road investment makes most of its contribution to the increase in commuting between contiguous natural regions and has no significant upward effect on commuting between regions that are farther away. The effect of infrastructure investments on the increase in commuting was largely evident among men and was small in respect of women. |
| Examining the effect of road investment on men’s wages, the authors found that the average road investment in a natural region and its main destination region (NIS 200 million in each region, in 1995 prices) increased men’s wages in the natural region by 10 percent. By implication, the total road investment in 1992–2004 increased men’s average wages countrywide by a similar increment. |
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Table 1: Commuting Rates (Working outside Natural Region)
,1992–1994 and 2002-2004, Percent |
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1992–1994 |
2002–2004 |
| Share of commuters among employed persons countrywide |
30.4 |
33.2 |
| Average commuter travel distance (km. as crow flies) |
19.3 |
21.9 |
| Share of commuters to non-contiguous national region (among employed persons countrywide) |
10.8 |
14 |
| Share of commuters who travel 20+ km. (among employed persons countrywide) |
9 |
12.1 |
| Share of commuters to Tel Aviv Natural Region (among total commuters) |
38.2 |
30.9 |
| Share of commuters to Tel Aviv and Central subdistricts – other than Tel Aviv Natural Region |
34.8 |
39.5 |
| Share of commuters among employed persons living in Northern and Southern districts (periphery) |
24.5 |
28 |
| Average distance traveled by commuters who life in periphery (km.) |
30.9 |
33 |
| Share of commuters from periphery to Tel Aviv and Central districts |
4 |
5.9 |
| Share of men who commute |
35.6 |
38.8 |
| Share of women who commute |
23.5 |
27.2 |
| Share persons aged 20-40 who commute |
32.3 |
35.7 |
| Share persons aged 41-65 who commute |
29.6 |
31.4 |
| Share of persons with 13+ years of schooling who commute |
32.2 |
35.9 |
| Share of persons with up to 12 years of schooling who commute |
29.5 |
30.3 |
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| * |
The views expressed in the paper are those of the author, and do not necessarily reflect those of the Bank of Israel. |
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