Modelling the Impacts of Inter-City Connectivity on City Specialisation

There is a high level of interest in investing in inter-city connectivity schemes. The rationale for these schemes is improved economic performance through increased productivity, jobs and output. Mobility costs of switching between sectors for labour and capital may limit the level of sectoral specialisation achieved and the associated positive productivity impacts through localisation effects. To investigate these impacts a stylised stock and flow model of two cities has been developed. The model has two business service sectors and a 20-minute reduction in rail travel times is introduced to understand the dynamics and the extent of barriers to localisation benefits due to labour and capital mobility costs, and to understand the degree to which these can be unlocked through inter-city transport. The results show that mobility costs limit the potential for increased specialisation through investment in inter-city transport and that further specialisation is more likely to arise when the scheme effects differ between sectors and between cities.