Impact assessment of transportation on regional economy using data envelopment approach: a case study in Bangladesh

Abstract

This study examines the role of transportation investment in regional economic development of Bangladesh and compares its effectiveness with respect to other input parameters. The investment pattern and criteria under which resources are allocated among competing sectors and projects might have created investment bias towards already developed regions and resulted in economic inefficiency. Data Envelopment Analysis (DEA) technique is used to examine the economic efficiency of investment in transportation infrastructure development. National investment policy appears to be inclined for more investment in the comparatively more developed regions under the pretext of higher aggregate production, while investments in infrastructural development of less efficient regions seem to be more effective by providing higher rate of retum. Data Envelopment Analysis (DEA) methodology is suggested in this research to assess the benefits of transportation infrastructure and system in regional economic development. The purpose of this research is to examine how transportation infrastructure and system affects the regional economic development of Bangladesh, one of the least developed countries in the world. The research focuses on the determination of relative economic efficiencies of 20 greater districts (administrative divisions) of Bangladesh and the role of transportation on the differences in economic efficiency among the districts. DEA is a linear programming based technique for measuring the relative performance of organizational units where the presence of multiple inputs and outputs makes the comparison difficult. It computes a scalar measure of efficiency and determines efficient levels of inputs and outputs for the organizations under evaluation. Since its introduction in 1978, DEA has been used to evaluate the efficiency of entities which are responsible for utilizing resources to obtain outputs of interest. It has been used to evaluate activities as varied as public schools, hospitals, health facilities, natural gas distribution utilities, and real-property maintenance, etc. To calculate the relative efficiencies of different districts, total area which include agricultural land, population, industrial asset and accessibility index (as a measure of transportation infrastructure and system) is used as inputs and the primary, secondary and tertiary sectors of GOP is considered as outputs in this study. The Accessibility Index is calculated from the existing transportation network of the country. The weights of the inputs, outputs together with the relative efficiency explain the role of the inputs, specifically the role of transportation in the zonal economy. It is possible to know, with the existing transportation infrastructure and system, which districts are producing efficiently and in which districts the lack of transportation infrastructure is acting as a barrier in further efficient utilization of the existing natural and other resources. The research also gives the target outputs for efficient economic activity for the lagging regions I districts of the country. Initial analyses of the study show that most of the zones perform inefficiently thereby causing imbalance in input factors of production and wastage of resources. It also identifies couple of areas where production efficiency is severely constrained by lack of accessibility. Such areas include Chiltagong Hill Tracts, Patuakhali, Oinajpur, Bogra, Pabna. The analysis also suggests that investment for improving accessibility in Tangail, Jamalpur, Faridpur and Chiltagong will be beneficial. Analysis of efficiency on the basis of sectoral production suggests that the regional economy is still primarily dependent on agricultural sector. Although service sector plays significant role in few zones, the role of manufacturing sector is very insignificant. In many zones where industrial and service sector is the driving force in economic activity, there exists scope for investment in transportation sector with relatively higher marginal rate of retum. In this study, the OEA method is also extended to capture the dynamic relationship between transportation investment and economic development. It is observed that there exists a lag of about three years between the marginal investment in transportation and the fOllowing economic development.