Quantifying the Economic Roles of Infrastructure

This work is part of the MISTRAL project (Multi-Scale Infrastructure Systems Analytics), whose aim is to develop and demonstrate a highly integrated analytics capability to inform strategic infrastructure decision making across scales, from local to global. Our particular goal within this project is to study and quantify the inter-relationship between infrastructure and economic activity. Indeed, whilst there are a growing number of empirical studies of the relationship between infrastructure investment and economic growth, the mechanisms by which infrastructure influences economic activity are not well understood in quantitative terms. Part of the difficulty derives from the fact that infrastructure delivers services to businesses and society through networks, and thus any appraisal needs to take place at a system scale. Furthermore, infrastructure can have non-marginal economic effects, and infrastructure investments are often intended to promote structural change, innovation, and social well-being. Infrastructure systems therefore present well-known, but still unresolved, challenges from the perspective of economic appraisal.

This project will try to tackle this knowledge gap by using an agent-based modelling approach in order to provide a reasonably complete account of the economy whilst resolving the physical roles of infrastructure in a way that can be directly connected to the engineering systems models developed elsewhere within MISTRAL. As a first step, we will extend the agent-based model of the UK housing market described above in order to take into account the necessary spatial and geographical aspects allowing us to capture the location decisions of households. Our second step will be to model the coupling between the location decisions of households and firms, with different forms of infrastructure influencing the decision-making processes of both types of agents. Finally, we will use this understanding to enable a rigorous appraisal of the benefits and risks of infrastructure investment.

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