Induced traffic can be an important part of the economic appraisal particularly when the objective of the investment is to stimulate economic development. It’s importance, however, is not restricted to such situations. The omission of induced traffic from the economic appraisal, or its incorrect treatment, may lead to either over or underestimations in the user benefits (consumer surplus) of an investment.
In this note we address this issue by considering: the importance of induced traffic for the economic appraisal (Section 1); what constitutes induced traffic (Section 2); the situations in which induced traffic is likely to be relevant (Section 3) and the manner in which it can be modelled (Section 4) and user benefits calculated when it is present (Section 5).
This Note includes three Annexes. The first shows the relative importance of including the benefits of induced traffic in the evaluation of an urban transport project. The second shows where the standard “rule of one half” breaks down in some situations that are often present in World Bank projects, while the third shows a numeric integration technique that can be used as a valid alternative to the rule of one half in many of these situations (and coincidently, provides a more precise evaluation even where the “rule of one half” gives an acceptable estimation).
World Bank, Washington D.C., USA. Transport Note No. TRN-11, 38 pp.