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A new report finds a hidden economic value of anywhere from $1.5 million to $1.8 billion a year.

Planning scholar Daniel Chatman of the University of California at Berkeley has been thinking a lot lately about "agglomeration." Don't let the technical word throw you. All it really means is more people in the same place. As more people collect in a city center, more jobs cluster there too, boosting both wages and economic productivity over time. And the key to it all, he believes, may be public transportation.

"To me it's fascinating," says Chatman. "It's all about how people interact with each other. This is what could be happening by virtue of this densification near transit stops, which could happen from investments that draw people to use transit."

In a new paper set for publication in Urban Studies, Chatman and fellow planner Robert Noland of Rutgers University use concrete numbers to make the case that transit produces agglomeration. They report that this hidden economic value of transit could be worth anywhere from $1.5 million to $1.8 billion a year, depending on the size of the city. And the bigger the city, they find, the bigger the agglomeration benefit of expanding transit.

Simply put, city officials now have a much stronger argument for using taxpayer money to improve their public transportation service.

"These results could be dropped directly into a cost-benefit analysis," says Chatman. "It would show a higher benefits-cost ratio for rail investments, particularly rail investments in large cities with existing transit networks."

Let's step back a moment and look at agglomeration more closely. One of the potential benefits of having more people in an area is that you have a wider labor force. That, in turn, means a better chance of matching the needs of a job with the skills of a worker — and, of course, making this match more quickly. Another benefit could be information exchange. As casual encounters among skilled laborers increase, say in the shops and on the sidewalks that crop up near transit hubs, so too does innovation.

Any transportation mode that brings people to a certain place could promote agglomeration, but public transit makes it especially possible because it moves so many people within such a confined space. If workers can only get to a budding job center by car, for instance, eventually traffic will become so bad as to hinder growth. But if transit is also established in the same job center, then far more people will be able to access the area, and clustering there can advance accordingly.

"Whatever does happen in response to a transit investment is going to be concentrated," says Chatman. "You're going to have a different kind of urban form that springs up due to transit than due to the auto."

But with so many variables in play — from job density to population growth to transit development — studying agglomeration has been extremely difficult. So Chatman and Noland ran a number of statistical models that took into account all these factors, as well as economic productivity measures like average wage, for more than 300 metropolitan areas across the United States. ("It really is a new kind of thing we did here," says Chatman.) The numbers were so complex that many of the models failed to pass statistical muster.

Those that did revealed a pretty clear line from transit expansion to economic growth via agglomeration.

Every time a metro area added about 4 seats to rails and buses per 1,000 residents, the central city ended up with 320 more employees per square mile — an increase of 19 percent. Adding 85 rail miles delivered a 7 percent increase. A 10 percent expansion in transit service (by adding either rail and bus seats or rail miles) produced a wage increase between $53 and $194 per worker per year in the city center. The gross metropolitan product rose between 1 and 2 percent, too.

On average, across all the metro areas in the study, expanding transit service produced an economic benefit via agglomeration of roughly $45 million a year — with that figure ranging between $1.5 million and $1.8 billion based on the size of the city. Big cities stand to benefit more simply because they have more people sharing the transit infrastructure. They also tend to have more of the traffic that cripples agglomeration in the absence of transit.

"As to how big it is," says Chatman of this hidden economic benefit, "it's most likely to be large in places that have congested road conditions, transit networks that are at capacity — those kinds of places — and probably less in smaller cities without very much road congestion."

Chatman stresses that because his method is so new, the results must be replicated before they're accepted. He also knows that some people will question the causality of the data: How can the researchers know, for instance, that transit alone is responsible for agglomeration? In response, Chatman points to the controls he and Noland installed in their statistical models — and to the fact that he's been critical of rail as an economic investment strategy in the past.

"Put it this way: I'm a skeptic on this stuff, and I was surprised to see these results so robust," he says.

If the findings do hold true, they mean that cities and transit agencies are underestimating the true benefits of public transportation. From there it's reasonable to expect all cities — though especially big ones — to base future requests for transit funding on the idea that agglomeration leads to economic productivity. If showing that system expansion leads to more riders and less congestion is good, and showing that it reduces pollution and improves public safety is great, then showing in big numbers how much economic growth will occur should be gold.

"This is the first U.S. work, so we'll see what happens, but I imagine you're going to see this coming up in people's [grant] applications, from the big cities," says Chatman. "It's in those big cities that you'd see benefits, and that those would potentially make it more likely that you'd make a decision to make an investment there."

Top image: pio3 /Shutterstock.com

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