Robust transportation investments reduce the costs of moving people and goods. This increases economic productivity, which can be measured roughly as the production of goods and services per dollar of private and public investment. A transport network makes markets more competitive. Economists often study resource allocation, that is, how specific goods and services are used.
A transportation system improves the allocation process because it expands the number of opportunities for suppliers and buyers. A government that builds roads and other transport infrastructure ensures that its social, political and commercial ties are strong inside and outside the country's borders. Similarly, households that receive income from employment in transport activities spend part of their income on local goods and services. A recent review commissioned by the Department of Transportation provides an important debate on the issues and evidence of the relationship between investment in transportation and economic performance.
In the first half of the 19th century, Americans built a strong transportation network through new technologies and heroic engineering companies. Due to demographic pressures and urbanization, developing economies are characterized by a mismatch between limited supply and growing demand for transport infrastructure. Tools and measures are being developed to assess and compare the performance of national transport systems. Transport companies have proven to be fertile ground for inventors, innovators, entrepreneurs and investors who support them.
A common fallacy assumes that additional investments in transportation will have a multiplier effect similar to that of initial investments, which can lead to misallocation of capital. To better document and monitor the economic returns of transportation investments, a number of indicators, such as transportation prices and productivity, can be used. There is a clear relationship between the quantity and quality of transport infrastructure and the level of economic development. Like most infrastructure projects, transportation infrastructure can generate an annual return of 5 to 20% of invested capital, and these figures are often used to promote and justify investments.
By the end of the 20th century in the United States, between 17 and 18 percent, or about one-sixth, is associated with transportation. Transportation is essential to the economy because an efficient transportation system promotes people's personal development and business growth. Investing in transportation connectivity can not only influence the amount of economic activity in a region, but it can also influence its location. A poor level of transport service can negatively affect the competitiveness of regions and their economic activities and, therefore, have a negative impact on regional added value, economic opportunities and employment.
However, technologies are being developed in all transport alternatives, including air transport.