Freight Benefit/Cost Study: Phase III – Analysis of Regional Benefits of Highway-Freight Improvements

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Contact Information: FreightFeedback@dot.gov

Federal Highway Administration
Office of Freight Management and Operations
1200 New Jersey Avenue, SE
Washington, DC 20590
Phone: 202-366-0408
Fax 202-366-3225
Web site: http://www.ops.fhwa.dot.gov/freight/

FHWA-HOP-08-019

Prepared by:
HLB Decision Economics Inc.

In Association with:
ICF International

February 2008

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Table of Contents

	Notice/Quality Assurance Statement
	Technical Report Documentation Page
	Executive Summary
1	Results of the Foundational National Analysis
1.1	Methodology
1.2	The Data
1.3	Summary of Empirical Findings, National Analysis
1.3.1	Additive Freight Reorganization Benefit
2	Methodology for Measuring Regional Reorganization Effects
2.1	Development of Regional Subgroups
2.2	Testing of Regional Subgroups
2.3	Selection of the Regional Groupings
2.4	Rate, Flow, Commodity, and Performance Data
2.4.1	Rate Data
2.4.2	Commodity Flow Data
2.4.3	HPMS
2.5	Variables for Regional Discrimination
2.6	Measuring Highway performance
3	Empirical Results
3.1	Estimating Regional Elasticities of Demand
3.2	Calculating Regional Additive Freight Reorganization Benefits
3.2.1	Microeconomic Framework
3.2.2	Additive Benefit Calculation Module
3.2.3	Regional Additive Benefit Factors
3.2.4	Commodity Flow Data Analysis
4	Summary of Findings
Appendix 1	Supplementary Data Tables
Appendix 2	Economic Framework
	Framing the Problem
	Nature of Reorganization
	Changes in Logistics Network Infrastructure
	Micro-economic Framework
	Approach
	Changes in Output/Product Demand
	Competitive Market
	Monopoly
	Accounting for Non-Marginal Cost Pricing
	Approach Summary

List of Figures

Figure 1	Cross-Sectional Relationship between Highway Performance and Freight Charges
Figure 2	Cross-Sectional Relationship between Freight Charges and Freight Demand
Figure 3	Assumed Speed-Flow Relationships
Figure 4	Change in Consumer Surplus from Changing Demand for Transportation as a Function of Unit Generalized Transportation Cost
Figure 5	Additive Benefit Estimation with Standard User Cost Models, An Illustration
Figure 6	Additive Benefit Estimation with Consumer Surplus Models, An Illustration
Figure 7	Freight Economics Influence Diagram
Figure 8	Relationship between Total Logistics Cost and Number of Warehouses Due to Changes in Inventory Policy
Figure 9	Generalized Cost Trade-offs for Transportation Services
Figure 10	Basic Inventory Cost Trade-offs
Figure 11	Inventory Levels Under a Fixed Order Quantity-Variable Order Interval Policy
Figure 12	Aggregate Relative Change in Transportation Demand
Figure 13	Benefits in the Presence of Monopoly
Figure 14	Typical User Link Travel Time Graph and Marginal Cost

List of Tables

Table ES-1	Freight Significant Corridors Assessed in this Report, Three Regions
Table ES-2	Estimated Impact of Changes in Highway Performance on Freight Demand, Three Regions
Table ES-3	Estimated Impact of Changes in Price on Freight Demand: United States and Three Regions
Table ES-4	Probability Ranges for Elasticity and Additive Benefit Factors
Table 1	Estimated Impact of Changes in Highway Performance on Freight Demand, National Analysis
Table 2	Probability Ranges for Elasticity and Additive Benefit, National Analysis
Table 3	Corridors Used in National Analysis
Table 4	Original Corridors Incorporated into Five Regions
Table 5	Original Corridors Incorporated into FHWA's Federal Lands Program Regions
Table 6	Original Corridors Incorporated into Three Regions
Table 7	Regression Results for Freight Demand (Pooled Regression)
Table 8	Results for Equation 1 for Three Regional Sub-groups
Table 9	Regression Results for Freight Demand (Fixed Effects)
Table 10	Results for Equation 2 for Three Regional Sub-groups
Table 11	GLS Regression Results for Freight Demand with Cross Section Weights (Fixed Effects)
Table 12	Results for Equation 3 for Three Regional Sub-groups
Table 13	Proposed Final Corridors for Three-Region Analysis
Table 14	Number of Segments and Years Used to Characterize Each Additional Corridor
Table 15	Descriptive Statistics of Corridors by Region
Table 16	Regression Results for the East Region
Table 17	Regression Results for the Central Region
Table 18	Regression Results for the West Region
Table 19	Implied Elasticity of Demand for Three Regions
Table 20	Additive Benefit Estimation with Standard User Cost Models, A Numerical Example
Table 21	Additive Benefit Estimation with Consumer Surplus Models, A Numerical Example
Table 22	Elasticity of Demand with Respect to Highway Performance
Table 23	Elasticity of Demand with Respect to Price
Table 24	Regional Additive Benefit Factors
Table 25	Top Commodities Transported in Three Regions (Thousand Tons)
Table 26	Top Commodities Transported in Three Regions ($Million)
Table 27	Implied Elasticity of Demand for Three Regions
Table 28	Probability Ranges for Elasticity and Additive Benefit Factors
Table 29	Summary Statistics for Panel Data

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