By James Laird and Daniel Johnson
Conference paper presented at European Transport Conference, Porto, 9-11 September 2026
Short abstract
Agglomeration benefits become more important as national incomes fall, because conventional user benefits are more income-sensitive than productivity benefits. Case studies of the Mitre Line in Buenos Aires and the WECARE corridor in Bangladesh show that agglomeration impacts can substantially exceed the 10-30% benchmark commonly used in high-income-country appraisal.
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R-Code for calculating agglomeration benefits
Acknowledgements
This research was supported by the World Bank. We are grateful to Matias Herrera Dappe, Aiga Stokenburga, Javier Morales Sarriera, Kazuyuki Neki and Martin Humphries of the World Bank for data provision and comments on the research report, Angus Laird University of Edinburgh for research assistance with the R code agglomeration calculation, Peter Mackie of University of Leeds for technical challenge and review and Eivind Tveter for comments on this paper. Responsibility for the views expressed and any errors contained in this paper lie with the authors.
Long abstract
Agglomeration benefits arise when transport improvements increase effective proximity between firms, workers, suppliers and customers, raising productivity through mechanisms such as knowledge spillovers, deeper labour markets and more efficient supply chains. In high-income countries these wider economic impacts are commonly estimated at around 30% of user benefits. This paper examines whether that benchmark is appropriate for low- and middle-income countries, where lower wages, values of time and travel demands reduce conventional user benefits, while transport projects may generate larger proportional gains in access to economic mass.
We first develop a simple conceptual model showing why agglomeration benefits are likely to form a larger share of total project benefits as national income falls. We then apply established agglomeration appraisal methods to two World Bank case studies: the US$390.7 million Mitre Line modernisation in Buenos Aires, Argentina, and the US$790 million WECARE road corridor upgrade in Bangladesh. The cases also test whether agglomeration analysis can be implemented where standard transport, employment and productivity data are incomplete.
The results indicate that agglomeration impacts can be materially larger than rich-country norms. For the Mitre Line, the discounted agglomeration impacts range from US$269 million to US$1,743 million, equivalent to an 18% to 115% uplift on the original present value of benefits, with the central case increasing benefits by 71%. For WECARE, the core estimate is US$837 million, increasing the present value of benefits and the BCR by 68.6%; under a higher elasticity assumption, agglomeration benefits rise to almost 180% of the original present value of benefits. In both cases, recent advances in big data, open-source spatial information and GIS methods help overcome data limitations that would previously have prevented analysis.
The findings suggest that the 10-30% rule should not be transferred mechanically to lower-income settings. Development banks and governments should screen transport projects for their potential to improve access to economic mass, particularly in dense labour markets, peri-urban areas and economically important corridors. Appraisal should integrate agglomeration analysis from the outset and present results both with and without wider economic impacts. Within this if agglomeration elasticities have to be transferred they should reflect local economic structure, sectoral composition, and labour-market conditions. Whilst there have been substantial improvements in data availability increasing the availability of big data sets and improving the evidence base on agglomeration elasticities in lower and middle income countries are directions for future research efforts.
The findings suggest that the 10-30% rule should not be transferred mechanically to lower-income settings. Development banks and governments should screen projects for their potential to improve access to economic mass, particularly where they connect dense labour markets, peri-urban areas or economically important corridors with significant industry and services activity. Where local agglomeration elasticities are unavailable, transferred values need to be justified against the local economic context and tested through sensitivity analysis, rather than applied mechanically. Future research should focus on improving country- and sector-specific elasticity evidence, accessibility data and spatial employment/productivity data, while developing practical tools that integrate agglomeration analysis with core transport appraisal from the outset.