January 1, 1994

Macroeconomic analysis of the high-speed rail

This study assesses the long term macroeconomic effects of the connection of Amsterdam and Rotterdam to the European high speed railway network via Antwerp and Brussels.

The focus is on the translation of the direct economic consequences of this infrastructure project to the effects on a macroeconomic level. Results from an economic impact study and a cost-benefit analysis are used as the starting point for the calculations with a macro/sectoral-model.

The infrastructure project itself has a positive effect on employment. However, this positive effect is tempered in a macroeconomic setting by a negative feedback mechanism. The project competes with other economic activities for labour and so exerts an upward pressure on wages and, consequently, on prices. The increase in export prices has a negative impact on the competitive position and therefore on exports, which reduces employment. The resulting macroeconomic effect on employment is small since the size of the project is quite small, relative to the economy as a whole (not more than two thousand persons employed). The pressure on wages becomes stronger as the economy approaches a state of full employment. Thus the strength of the negative feedback mechanism depends on the assumed efficiency of the labour market in the future.

In recognition of the uncertainty on this point in particular and on the future long term economic development in general, a scenario approach is called for. Two scenarios from the CPB study The Netherlands in Triplo (1992) are used for the calculations: Global Shift, a pessimistic scenario with a labour market as inefficient as today, and European Renaissance, a more optimistic scenario with a more efficient labour market. The uncertainty relating to the direct consequences of the project is dealt with by sensitivity analysis: the effects of an alternative connection to the high speed railway network are calculated.