Quantifying the impact of development of the transport sector in Pakistan

Abstract

The paper quantifies the impact of tax-financed public investment in infrastructure and services by mode of transportation, land, air, and water, using the dynamic computable general equilibrium model. The model includes resource cost, taxes, and cost of externalities such as congestion, pollution, and accident, where congestion and accident are incorporated for land transport only. The model measures benefits of an investment programme by a change in prices not only in the transport sector, but also in taking account of the advantages to other sectors of the economy. The results show that tax-financed investment in transport has reduced its share and cost of non-factor services in the total value of commodities (first objective of NTC). It reduces transport cost of movement of passengers. Improving safety and reliability of transport operations can be concluded from a reduction in the environmental and accident cost (2nd objective of NTC). Overall, the transport sector development has a positive impact on macro aggregates too. © The Pakistan Development Review.