Abstract:
This paper has both a methodological and an evaluative purpose. The evaluation shows that Auckland’s northern motorway extensions had a benefit: cost ratio (BCR) of at least 6.3, much higher than the ex ante cost benefit analysis (CBA) showed. This result underpins the paper’s methodological contributions. We depart from the very limited approach to measurement of benefits used in typical CBA. Instead, we show how modern urban economics insights relating to land value capture of amenity and productivity improvements can be used to measure benefits of an infrastructure project. The paper uses recent spatial econometrics advances to show how these new techniques affect benefit estimates. The use of land values as a measure of benefits and use of the spatial econometric approaches both contribute to the higher level of benefits estimated for the project relative to standard CBA approaches.