Measuring the Aggregate Productivity Benefits from ITS Applications: The California Experience

Problem

There are three comprehensive policies contained in California's Transportation Plan (CTP). These policies are to promote economic vitality through mobility and access; to provide safe, convenient and reliable transportation; and to provide environmental protection. Transportation applications such as Intelligent Transportation Systems (ITS) offer much in the way of addressing the policies given in the CTP.

Because investments in ITS technologies will clearly have widely differing impacts, there is an inherent uncertainty in predicting the impacts of a particular ITS strategy in a given location. If better understanding can be gained of the extent to which ITS strategies provide benefits to the economic output of a county or region, then decisions to invest in ITS in the future will be better informed. This study uses measures of productivity to assess the impacts that ITS applications have had in California counties.

Findings

Two related models were used to evaluate the economic benefits of ITS.

The first model was a production function model that represented the way a county assembled and delivered a range of goods and services to the marketplace. Include in the production function were private capital, labor resources, highway capital, and measures of the development and integration of ITS projects into the highway system. Two ITS technologies were considered: ramp meters and changeable message signs. The empirical results show that highway capital provides counties with a competitive advantage creating output gains and a net positive benefit.

The second modeling effort was to develop measures of Total Factor Productivity (TFP). This productivity measure takes account of the aggregate growth in outputs as well as inputs. The research estimates show that ITS adds benefits that should be counted in any project evaluation. The benefits are in the form of improvements in productivity. This leads to cost reduction in the delivery of gross county product.

Further research should focus on answering the following questions: What industries are most affected by ITS applications? Does it matter how many ITS applications are present, in other words, are there diminishing returns to similar ITS projects? Finally, does it matter how ITS projects are combined?