Do the Selected Trans European Transport Investments Pass the Cost Benefit Test?

Abstract

This paper assesses the economic justification for the selection of priority projects defined under the auspices of the Trans-European transport network. In analyzing the current list of 30 priority projects, we apply three different transport models to undertake a cost-benefit comparison. We find that many projects do not pass the cost-benefit test and only a few of the economically justifiable projects would need European subsidies to make them happen. Two remedies are proposed to minimize the inefficiencies in future project selection. The first remedy obliges each member state or group of states to perform a cost-benefit analysis (followed by a peer review) and to make the results public prior to ranking priority projects. The second remedy would require federal funding to be available only for projects with important spillovers to other countries, in order to avoid pork barrel behaviour.

Keywords: transport infrastructure, cost benefit analysis, Europe Union

JEL Classification: R42, H11, H54