Wider economic benefits

At a glance

The concept of ‘wider economic benefits’ (WEBs) is relatively new to the practice of transport appraisal in Australia.

WEBs are improvements in economic welfare that are acknowledged, but that have not been typically captured, in traditional cost-benefit analysis (CBA). They arise from market imperfections: that is, prices of goods and services differing from costs to society as a whole.

There are currently three categories of WEBs that may be relevant for transport initiatives in Australia:

  • WEB1 – agglomeration economies
  • WEB2 – output change in imperfectly competitive markets
  • WEB3 – tax revenues from labour markets.

Although the calculation of WEBs is still in its infancy, the correct interpretation and high-quality estimation of WEBs (using the most suitable data available) can add texture to the decision-making process for certain initiatives.

Importantly, WEBs are not the same as the economic impacts determined by CGE (computable general equilibrium) or input–output models. It is also important not to include in WEBs secondary impacts that do not increase net benefits, or that double count benefits already captured in the CBA or the accepted WEBs listed above.

There are currently serious WEB measurement difficulties in Australia due to limited data availability. Econometric work now under way, funded by the Australian Government, is expected to result in significantly improved estimation of WEBs for Australia. In the interim, practitioners should follow Infrastructure Australia’s advice and present CBA results without WEBs, and then with WEBs, treating WEBs effectively as a sensitivity test.