A quantitative urban model for transport appraisal

Abstract

Transport cost-benefit analysis (CBA) has evolved since its inception to become one of the most influential and ubiquitous applications of microeconomic theory, shaping billions of dollars of investment in the infrastructure sector. A key limitation of transport appraisal practice is its reliance on partial equilibrium (PE) models, which restricts the ability to quantify potentially transformative impacts outside the transport market. In this paper, we build on the principles of quantitative spatial economics and design an appraisal method that integrates the causal estimation of key parameters into an invertible spatial general equilibrium (SGE) model. Our specification yields travel time valuations that are micro-founded through an explicit leisure–labour trade-off, making them unique to each residence–workplace pair. We decompose the aggregate welfare change in SGE into direct user benefits and wider economic impacts, quantify the statistical uncertainty surrounding each welfare component, and compare the welfare estimates in SGE with those of the mainstream PE method. As a case study, we replicate Greater London with 983 spatial units. We find that the welfare result in SGE is similar in magnitude to the PE CBA outcome in the case of the Elizabeth Line, a major urban rail project. For a series of randomly simulated transport improvements, the two approaches scale proportionately, but the occasional project-specific deviations can be substantial. The paper illustrates that the SGE approach complements aggregate welfare estimates with a detailed spatial pattern of local economic outcomes and is well suited to assessing transport and land-use policies simultaneously. © 2026 The Authors.